Critical Observer

RAISING THE INTEREST RATE MAY TRIGGER GLOBAL DEBT CRISIS

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Debt ratios have reached extreme levels across all major regions of the global economy, leaving the financial system acutely vulnerable to monetary tightening by the US Federal Reserve, the world’s top financial watchdog has warned. 
 
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My Comment:  I would say it's a safe bet that the FED will NOT be raising interest rates in the very near future. The FED just wants to make it look like they are ABLE to raise them, and that the market is healthy enough to do so. But in reality, it's just for show. There is no way that raising the interest rates now is realistic. As many reliable economists have pointed out, it can't be done right now without collapsing the market.</h3>
The Bank for International Settlements said the wild market ructions of recent weeks and capital outflows from China are warning signs that the massive build-up in credit is coming back to haunt, compounded by worries that policymakers may be struggling to control events. 
 
“We are not seeing isolated tremors, but the release of pressure that has gradually accumulated over the years along major fault lines,” said Claudio Borio, the bank’s chief economist. 
 
The Swiss-based BIS said total debt ratios are now significantly higher than they were at the peak of the last credit cycle in 2007, just before the onset of global financial crisis. 
 
 
<a href="http://www.telegraph.co.uk/finance/economics/11858952/BIS-fears-emerging-market-maelstrom-as-Fed-tightens.html" target="_blank">Read The Full Article ></a>

RAISING THE INTEREST RATE MAY TRIGGER GLOBAL DEBT CRISIS

Debt ratios have reached extreme levels across all major regions of the global economy, leaving the financial system acutely vulnerable to...

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Global Market Meltdown Has Begun - Don't Be Mistaken

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There is so much confusion out there.  On the days when the Dow goes down by several hundred points, lots of people pat me on the back and tell me that I “nailed” my call for the second half of this year.  But on the days when the Dow goes up by several hundred points, I get lots of people contacting me and telling me that they are confused because they thought the stock market was supposed to go down.  Well, the truth is that if there is going to be a full-blown market meltdown, we would expect for there to be wildly dramatic swings in the market both up and down.  A perfect example of this is what we experienced during the financial crisis of 2008.  9 of the 20 largest single day declines in stock market history happened that year, but 9 of the 20 largest single day increases in stock market history also happened that year.  If we are moving into another great financial crisis, there should be massive ups and massive downs, and that is precisely what we are witnessing right now. 
 
On Tuesday, the Dow surged several hundred points.  There was much celebrating in the mainstream media over this, but what they failed to realize was that this was another big red flag.  And we saw this volatility carry over into Wednesday.  The Dow was up 171 points early in the day before ending down 239 points. 
 
By themselves, those two days don’t mean a whole lot.  The key is to look at them in context.  And in context, we have already witnessed the most dramatic stock market crash since the last financial crisis. 
 
There will be more days when the stock market absolutely plummets and there will be more days when it absolutely soars.  No stock market crash in U.S. history has ever gone in just one direction continually.  There are always giant waves of momentum that cause panic selling and panic buying. 
 
There is one thing that could change that.  A major “black swan event” such as a historic natural disaster, an unprecedented terror attack, or the outbreak of war could potentially be enough to chase all of the buyers out of the marketplace.  And considering the times that we are moving into, those things should not be ruled out. 
 
But minus some type of event like that, we should expect lots of wild swings in both directions. 
 
Over the past couple of years, I have repeatedly attempted to explain the general principle that markets tend to go up when they are calm and they tend to go down when they are volatile. 
 
If you want the bull market to return, you should be rooting for lots of really, really boring days on Wall Street. 
 
When things are boring, investors make money. 
 
Days that are “exciting” are really bad for Wall Street.  Investors like a world that is predictable, and when conditions start changing rapidly they get very, very nervous. 
 
In the months ahead, trillions of dollars are going to be lost in stock markets all over the planet.  Feel bad for the retirees and the hard working families that are going to get wiped out by this, but don’t feel bad for the banksters.  They have been laughing it up while most of the country has been suffering during our ongoing economic decline.  If you don’t believe me, just check out this YouTube clip. 
 
A lot of people are going to be paralyzed during this time, because they won’t know what to do.  They didn’t heed the warnings up until now, and they thought that they would be able to safely get out of the market when things started getting crazy.  The big ups and big downs in the markets will confuse them, and the mainstream media will be telling them that everything is just fine. 
 
If you have been waiting for the market to send you “warning signals”, then you can stop waiting because it is happening right in front of your eyes. 
 
Now is not a time for fear.  Personally, I seek to live my live in a constant state of peace without any fear even though I write about some very hard realities almost every day. 
 
This is part of the reason why I so adamantly encourage people to prepare for what is ahead.  Knowledge and preparation can help eliminate fear. 
 
If you already know what is coming and you are already prepared for it, you won’t be freaking out like the rest of the general population will be when things start really going crazy. 
 
I want to share something with you that Brandon Smith wrote recently… 
 
Panic betrays and fear kills. The preparedness culture is built upon the ideal that one must defeat fear in order to live. How a person goes about removing uncertainty from the mind is really up to the individual. For me, combat training and mixed martial arts is a great tool. If you get used to people trying to hurt you in a ring, it’s not quite as surprising or terrifying when it happens in the real world. If you can handle physical and mental trauma in a slightly more controlled environment, then fear is less likely to take hold of you during a surprise disaster. 
 
Six months may be enough time to enter a state of mental preparedness, it may not be, but more than anything else, this is what you should be focusing on. All other survival actions depend on it. Your ability to function personally, your ability to work with others, your ability to act when necessary, all rely on your removal of fear. Take the precious time you have now and ensure you are ready to handle whatever the future throws at you. 
 
Life in America in the years ahead is going to look dramatically different from what life in America looks like right now.

Global Market Meltdown Has Begun - Don't Be Mistaken

There is so much confusion out there. On the days when the Dow goes down by several hundred points, lots of people pat me on the back an...

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WALL STREET PANICS OVER GLOBAL RECESSION FEARS

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Wall Street plunged Tuesday after investors feared weak data from China, the world’s second-largest economy, would lead to a global recession. 
 
China’s manufacturing sector suffered its quickest deterioration in over six years, leading to a three-year market low and other sectors of the Chinese economy also slowed down significantly. 
 
In response, all three major U.S. stock indices, the Dow Jones, the S&P 500 and NASDAQ, were down two percent in early trading. 
 
“While a measure of calm has returned to these markets recently and they have seen relief rallies, many of the underlying negative fundamentals are still in place,” said Nariman Behravesh, chief economist for IHS. “As a result, the downside risks for most commodity prices, exchange rates, and stock markets are likely to persist for some time, while growth in many parts of the world, especially in emerging markets, is likely to deteriorate further.” 
 
Investors panicked once China’s official manufacturing Purchasing Managers’ Index (PMI) dropped to 49.7. 
 
“The PMI was below 50, which is a psychologically important level and puts into real focus the fact that China is contracting,” said Joe Rundle, a senior sales trader at ETX Capital. “With the weak data coming out, we’re going to see the negative sentiment from the last few weeks continuing.” 
 
This pessimistic outlook may become self-fulfilling. 
 
In fact, Canada has already fell into a recession after its economy retreated 0.5% in the second quarter and 0.8% in the first. 
 
“Canada’s manufacturing sector continues to face growth headwinds from heightened global economic uncertainty and sharp falls in energy sector capex plans,” said Cheryl Paradowski, president and chief executive officer of SCMA. 
 
Collapsing oil prices have also hurt Canada, which is the world’s fifth-largest oil producer. 
 
The decaying conditions in Canada and China could trigger a global recession. 
 
by KIT DANIELS | INFOWARS.COM

WALL STREET PANICS OVER GLOBAL RECESSION FEARS

Wall Street plunged Tuesday after investors feared weak data from China, the world’s second-largest economy, would lead to a global reces...

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MARKET COLLAPSE: CENTRAL BANKS CAN’T STOP IT

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Like children clinging to their parents, stock market traders turned to their central banks last week as they sought protection from the frightening economic figures coming out of China. Surely, they asked, the central banks would ward off the approaching bogeymen, as they had so many times since the 2008 crash. 
 
The US Federal Reserve came up with the goods. William Dudley, president of the bank’s New York branch, hinted that the interest rate rise many had expected next month was likely to be delayed. 
 
A signal that borrowing costs would remain at rock bottom was all it took. After Black Monday and Wobbly Tuesday, the markets recovered to regain almost all their recent losses. 
 
It was just as if they had said to themselves: who cares if China’s economy is slowing; the “Greenspan put”, which so famously propped up US stock markets during the 1990s and early 2000s with one interest rate cut after another, is still in operation. 
 
The meeting of the world’s most important central bankers in Jackson Hole, Wyoming, this weekend only confirmed the need for Britain, Japan, the eurozone and the US to keep monetary policy loose. 
 
Yet the palliative offered by the Fed is akin to a parent soothing fears with another round of ice-creams despite expanding waistlines and warnings from the dentist and the doctor. 
 
According to some City analysts, the stock markets are pumped with so much cheap credit that a crash is just around the corner. And they worry that when that crash comes, the central banks are all out of moves to prevent the aftershocks from causing a broader collapse. 
 
Since 2008 the Fed has pumped around $4.5 trillion into the financial system. The Bank of England stopped at £375bn. The Bank of Japan is still adding to its post-crash stimulus with around $700bn a year and the Frankfurt-based European Central Bank will have matched its cousin in Tokyo by the end of the year. 
 
In each case, the central bank has adopted quantitative easing, which involves buying government debt to drive up its price. A higher price lowers the returns and encourages investors to go elsewhere in search of gains. It has meant a big shift in the portfolios of fund managers in favour of shares. Apart from a few blips due to the Greek crisis, stock markets have boomed. This summer, the FTSE 100 soared past 2008 levels to top its 1999 peak. 
 
But China, which has borrowed heavily to keep its economy moving, is running out of steam. Beijing has said it does not want to encourage another borrowing boom. But to prevent a crash, it is doing just that. In the last two weeks it has cut interest rates and loosened borrowing limits. It has even invested directly in the market, buying the shares of smaller companies. 
 
So we face the shocking prospect of central bankers, in thrall to stock market gyrations, making the world a more unstable place with promises of yet more cheap credit. 
 
There are a few alternative courses of action that Bank of England governor Mark Carney could still propose. He could tell politicians that the only sustainable way to get their economies moving is with hard cash from taxed wealth and incomes. If that is too unpalatable, governments should borrow directly to fund public infrastructure and productivity improvements. 
 
And if the government is too embarrassed to admit to voters that it needs to borrow money, then the least central banks can do is sign deals with high street banks to lend, rather than hoping they will take QE funds and do something useful with them. Because the evidence is already there for all to see that investors would prefer to pump the money into the stock market and property, both of them inherently unstable and prone to violent crashes. 
 
Google feels the EU heat 
‘We have owned the internet,” Barack Obama crowed in a video interview this February. “Our companies have created it, expanded it, perfected it.” But from tax to privacy and now a string of antitrust investigations, one of those companies, Google, is under attack on multiple fronts in Europe. 
 
The US president argued that what has been presented as high-minded intervention by regulators is in fact a commercially driven bid to protect old-world technology companies from the Silicon Valley invaders. 
 
Europe’s most powerful regulator, the Brussels competition policy chief Margrethe Vestager, has taken aim at Google Shopping, its price-comparison service. In April, she launched a legal process that could result in a big fine. On Thursday, the search giant filed a 150-page rebuttal. 
 
First of all, Google says it has not choked off traffic to rival shopping price sites – the traffic it sends to these kinds of sites has increased by 227% over a decade (its own data shows). Sounds like a big number. Until you look at the growth in Google’s own traffic over that period. The number of searches worldwide now stands at somewhere near 1.2 trillion a year – an increase of 750% in a decade. 
 
Google also wants its shopping service considered as part of a much larger group that includes actual retailers, like Amazon, and marketplaces, like eBay, where people also go to compare prices. Perhaps, but these are very different businesses. The capital needed to launch an online retailer, let alone one with a global presence and a one-day delivery guarantee, is much larger than the funding required for a price-comparison startup. 
 
Google’s strongest point is that forcing a company to offer its services to rivals is a drastic measure normally reserved for monopoly utilities. Google is very useful, but it is not water or electricity. Google Shopping is a very niche service. 
 
The argument about fair price comparison is a sideshow given the much bigger worries about privacy, security and tax that currently dog the digital world. But a victory for regulators here could lead to more assaults – on Google’s flight-comparison service and maps. Vestager has also launched an investigation into Android, the group’s market-leading phone software. Obama may be called on to cheer the home team again before this fight is over. 
 
Two sides to the national living wage? 
George Osborne has already claimed credit for Sainsbury’s increasing the base pay of its shop floor staff by 4%. “Britain deserves a pay rise so great Sainsbury’s staff will be paid at least national living wage early with biggest increases in 10 years,” he tweeted last week. 
 
It is a indeed a credit to the chancellor that he has put pay on the agenda for Britain’s supermarkets, the country’s largest private employers, by announcing a national living wage in the budget last month. However, Sainsbury’s announcement is just one side of the coin: the other side is how it will finance the pay increase. 
 
The Office for Budget Responsibility has estimated that the chancellor’s national living wage will lead to 60,000 job losses as companies fund the higher minimum pay by cutting jobs. Moody’s, the credit rating agency, has warned retailers could close stores, increase prices and employ more under-25s – who do not qualify for the national living wage. Perks for staff, such as in-store discounts, could also be at risk. 
 
Sainsbury’s did not downgrade its profit forecasts at the same time as announcing the pay increase, so it must have found the money from somewhere – time will tell where. 
 
From: The Guardian

MARKET COLLAPSE: CENTRAL BANKS CAN’T STOP IT

Like children clinging to their parents, stock market traders turned to their central banks last week as they sought protection from the ...

Read Article »