Excerpt GEAB 76 (June 2013) - Global systemic crisis II: second devastating explosion/social outburst on a worldwide scale

- Excerpt GEAB N°76 (15 June 2013) -

A 2008 Lehman type shock, the fire’s symbolic start and especially widespread awareness of the situation, has not yet occurred. This really isn’t good news because, over time, the situation is getting worse and it’s not a shock that one must prepare for but a devastating explosion.



The current period is so troubled that any straw risks breaking the camel’s back. Or, in other words, the house of cards is so fragile that the slightest tremble will cause its collapse: so, it’s essential to prepare now for crisis number two which can happen from one day to the next by the beginning of 2014 at the latest and probably well before then. Remember that one of the potential trigger events which allowed us to identify the March-June 2013 period as that of the relapse was the US debt ceiling supposed to be reached in May; now this has been miraculously pushed back to September or October thanks particularly to a revaluation of Fannie Mae’s real estate assets by the new real estate bubble created by the Fed, the bursting of which will amplify the relapse (13).

Median new house prices in the US compared to individual disposable income, 1990-2013. Source ZeroHedge.
Median new house prices in the US compared to individual disposable income, 1990-2013. Source ZeroHedge.
But the deadlines are only ever pushed back, never resolved. The lack of imagination and the inability of the world-before to devise an exit from the crisis not exacerbate it (especially in becoming a willing player in global governance reform) is then particularly distressing.

Historians will certainly consider the 2008 crisis as a warning shot ahead of that of 2013. All the world’s regions won’t be affected in the same way but all will suffer. According to LEAP/E2020 the stages of this second crisis can be summarised as follows:
  • end 2013, financial impact: collapse of financial markets especially in the US and Japan. Banks can no longer be saved by States and bail-ins are put in place;
  • end 2013-2014, spreading to the real economy: the financial impasse causes/reveals a major world recession and the reduction of international trade;
  • 2014, social impact: the economic deterioration causes unemployment to explode, in the United States the dollar’s decline lowers the standard of living, riots mushroom everywhere;
  • 2014, political crisis: the governments of the most affected countries are under fire for their handling of the crisis, forced resignations and early elections are expected, if not coups;
  • 2014-2015, international management of the crisis: together Euroland and the BRICS impose a new international monetary system and lay down the bases of a new global governance;
  • 2015: the least affected regions have exited the crisis definitively;
  • 2018 : it will take the United States, the United Kingdom and Japan five years to purge themselves of the crisis with, ultimately, a greatly reduced standard of living and a considerable loss of global influence (resulting from their refusal to participate in the re-casting of global governance on new bases).

Being at the centre of the problem, the United States will clearly be hit head-on as well as their direct area of influence (mainly the United Kingdom and Japan). In Euroland, which has already largely began the necessary process of change, the cleanup of its economy (14) and the strengthening of its governance (the most recent example being Hollande and Merkel’s willingness to put a Eurozone government in place (15)), and which has already suffered for this reason, will be less affected by this second crisis than other countries/regions; but the political crisis in the Eurozone is, on the other hand, weakening this region on a social level.

The emerging countries will be severely impacted by the global slowdown but, as we will see in the “Telescope” section, they have begun to diversify their economies, especially in turning them in the direction of domestic consumption, and can versus overcome the crisis quicker. That said, their strategy of domestic demand development will suffer considerably from the shock; now these countries’ social fabric is still fragile.

However, we mustn’t forget that the Western hyper consumption which we have seen over these last 20 years is finished since the artificially high standard of living in this part of the world will be reduced. The move will be particularly clear-cut in the United States when the dollar, losing its special central role, will drop to reflect the true worth of the US economy, which is in the order of 20% lower of what current numbers tell us, particularly due to the huge quantity of phantom assets.

Given the inevitability of a fall in the Western standard of living, it begs the question which fundamentals of society should be preserved to avoid a pure and simple collapse of our models (or what remains of them). People can tolerate a lower level of purchasing power if, besides, it enjoys quality public services (education, social security, infrastructure in particular) requiring effective and fair tax payments (the current trend of fiscal tightening is, therefore, a move in the right direction (16)).

In Europe, these are the characteristics to preserve and enhance, that’s to say the direct opposite of the Greek government’s appalling decision to cut off the public television service from one day to the next (17).

We will enlarge this remark on education and infrastructure in our « Telescope ».


In the face of the coming conflagration, the main private financial players (banks, hedge funds, etc.) are currently in “devil take the hindmost”, or rather “Goldman and the others first”, and are trying to resell their products to unsuspecting investors before they lose their value. These are signals that do not lie on the impending shock. The gold mini crash in April, the rise in sovereign bond interest rates and Goldman Sachs’ recommendation to sell US Treasury bonds, stock exchanges which fall heavily some days, all that reflects major players’ withdrawal from the markets on the sly.

So as not to be isolated the United States is trying to keep Europe close to its chest with the negotiation of the transatlantic free trade agreement which will, in particular, allow the export of US shale gas to Europe thereby hampering the historic tie with Russia as a gas supplier. But, beyond the fact that this agreement will lead to nothing according to our team or is an empty shell (as previous GEAB issues explained), the European-US divorce, led in particular by Germany (18) and France (19), is currently being consummated on the heels of an impressive series of “affairs”, be it Big Brother (20) or morals at the core of US diplomacy (21).

China, which has been one of the principal countries keeping the United States on a drip by buying its Treasury bonds, having sufficient time to progress its transfer out of the dollar and be less dependent on exports, has considerably reduced its exposure to the world’s number one problem, the dollar, by multiplying swap agreements, insidiously and gradually undermining the dollar’s base. On a commercial level, so to speak, it has actually laid the groundwork for a basket of local currencies abandoning the dollar pillar. The last five years have, therefore, enabled it to be better prepared, including making itself indispensable in Asia and keeping a comfortable buffer of currency reserves, even if the emerging countries’ bubble hasn’t spared it.

The share of world payments in Yuan has tripled between January 2012 and April 2013. At this rate the Yuan will dethrone the Yen before the end of 2014. Source : SWIFT RMB tracker.
The share of world payments in Yuan has tripled between January 2012 and April 2013. At this rate the Yuan will dethrone the Yen before the end of 2014. Source : SWIFT RMB tracker.
Euroland is slowly beginning to get closer to the BRICS as evidenced by the authorisation given to the Dagong rating agency to do business in Europe (22), and move away from the Anglo-Saxons as shown by the willingness to repatriate the Libor fixing to Paris (23) (!).

So the de-coupling with the United States continues slowly and the former faithful German ally is increasingly distancing itself from Washington: the latest example to date is quite significant, unimaginable a little while ago, the “surveillance” of its citizens by the American government is openly criticised as “Stasi methods” by Germany (24)…

This alliance with the BRICS, allowing the joining of these two regions’ complementary strengths, will guarantee that the two blocs have a better capacity to absorb the coming shocks.



13 It will be quite ironic to have to save Fannie Mae once again, which is allegedly back to full health.

14 One of the rare pieces of good news in the world at the moment comes, in fact, from the Eurozone: Surprise Growth In Eurozone Industrial Output Adds To Recovery Hopes, RTT News, 12/06/2013.

15 Source: FAZ, 30/05/2013.

16 See previous GEAB issues on the fight against tax evasion.

17 Source: PressEurop, 12/06/2013.

18 Source: Reuters, 11/06/2013.

19 Source: CNBC, 13/06/2013.

20 Source: Washington Times, 13/06/2013.

21 Source: Le Point, 12/06/2013.

22 What the Europeans haven't been able to do, the Chinese are doing for them! Source: Challenges, 07/06/2013.

23 Source: Deutsche Welle, 06/06/2013. As a reminder, the "L" in Libor means London...

24 Source: Reuters, 11/06/2013.

Samedi 1 Mars 2014
Lu 6469 fois

GEAB N°90 - Contents

- Published on December 15, 2014 -

Global systemic crisis 2015 – Oil, currencies, finance, societies, the Middle East : Massive storm in the Western port!

. « Global systemic crisis: the end of the West we have known since 1945 »
. The oil crisis is systemic because it is linked to the end of the all-oil era
. The US in one hell of a state
. Europe post-Ukraine: lots of questions
. Three missions for the new Europe: resolve the Ukrainian crisis, put Euro-Russian relations back on the right path, avoid a European QE
. Middle East: traditional alliances’ big waltz
. Saudi Arabia, Iran: the allies change sides
. And Western « values » in all this
Read the public announcement

2015 – new phase of the crisis: the oil systemic crisis

. The impact of speculation
. Price War
. Systemic oil crisis and finance
. Systemic oil crisis and geopolitics

Investments, trends and recommendations

. Oil: beware!
. Energy intensive industries like airline companies
. Renewable energy: the good and the bad
. 2015: Euro & Yen rebound
. Gold: still safe

Evaluation of our anticipations for 2014
(from GEAB N° 81 in January 2014): a 69% success rate