June 2006 - Beginning of phase 2 of the global systemic crisis: the phase of acceleration - Consequences for economic and political players and decision-makers


Annoucement GEAB N°5 – May 15, 2006


Last February, LEAP/E2020 anticipated that a global systemic crisis was to be triggered at the end of March. Today, three months later, LEAP/E2020 can anticipate that the initial phase of this crisis is about to be finished and that, as soon as the beginning of June 2006, the crisis will enter a phase of acceleration. Before detailing the main features of this new phase (described in GEAB Nr5 ), LEAP/E2020 would like to clarify the 4 different phases of a global systemic crisis.

 

A global systemic crisis develops following a complex process where 4 phases can be distinguished, overlapping one another:

. in the first so-called “trigger” phase, a variety of until then un-related factors, start converging and interacting in a way that is perceptible mostly by careful observers and central players

. in the second “acceleration” phase, a large majority of players and observers suddenly become aware that a crisis is there and that it has already begun to affect a growing amount of the system's components

. in the third so-called “impact” phase, the system starts to transform radically (implosion and/or explosion) under the strain of cumulated factors, simultaneously affecting the whole system

. in the fourth and last “decanting” phase, the features of the new system born from the crisis begin to appear.

 

In the present situation, LEAP/E2020 estimates that the initial trigger-phase is about to finish and that, during June 2006, the world will enter a phase of acceleration of the crisis.

Indeed, in less than three months, many certainties as to the future were turned upside down (« inescapable » dollar-denomination, « return » to cheap oil, « peaceful » solution to the Iran/USA conflict, « sustainability » of the US real-estate bubble, US « domination » over two other key global players - China and Russia,…) and a great number of indicators now point at converging directions, all of them sources of unbalance for the current system (vertiginous rise in gold and precious metals prices, escalation of inflationary pressures, increase of the interest rates, EURUSD approaching 1.30, large amounts of central banks' reserves being switched to Euros, rise of Asian currencies, stock market and currency crises developing in various areas in the world, growing amounts of articles published in the international and national press using words such as « krach, crisis, collapse, risk, conflict, … » ).
 

Figure 1 - Evolution Dow Jones/M3 --- Dow Jones/Gold - source : www.sirchartsalot.com

According to LEAP/E2020, this « trigger-phase » can be seen as a « learning » phase for the system's players. Some of them properly anticipated the evolution and bet on a breakdown of dominant trends. While they still seemed marginal and irrational to the majority a few weeks ago, they now appear to have « won » when the majority has « lost » following the system's “normal” trends. This “lesson” conveys cumulative effects and soon considerably strengthens all breakdown tendencies, resulting in switching from trigger-phase to acceleration-phase. It also reinforces the conviction of the strategic players who got involved into breakdown policies (or who anticipated the breakdown), and weakens in a sustainable way all regulation capacities of the system now faced to a soon generalized crisis of confidence. Well, in the current system, one inherited from WWI and transformed by the fall of the Iron Curtain, whether it is in the financial, economic, monetary or strategic sector, everything relies on the trust granted by each of us to one central player (the US ) and to the different components of its might. The passage from phase 1 to phase 2 marks the collapse of this trust, sector by sector.
 

 
Figure 2- Saisies immobilières aux Etats-Unis

 
LEAP/E2020 therefore estimates that these sectoral losses of confidence will converge in the course of June 2006, and induce the acceleration of the crisis process. The acceleration should elapse over 3 to 6 months and convey seven concrete consequences:
  1. accelerated collapse of the Dollar
  2. internal social and political crisis in the US
  3. Iran/USA/Israel military conflict
  4. increased global inflation
  5. stop of the process of trade and economic globalisation
  6. accelerated emergence of new regional/continental « blocks »
  7. rebalancing of world assets' comparative value.


The passage to phase 3 (so-called « impact-phase ») of the global systemic crisis process will occur when at least four of the previously mentioned factors will have taken place. Simultaneously, it is possible, during the acceleration-phase already, to distinguish some of the tendencies that will shape up the future global system, and therefore to start initiating the decisions and policies likely to prepare a post-crisis future.


Mardi 3 Octobre 2006

GEAB N°61 - Contents

- Published on January 16, 2012 -

Global systemic crisis - 2012: The year of the world’s great geopolitical swing
This GEAB issue makes it six years that the LEAP/ E2020 team have shared their anticipations with their subscribers and readers of their public briefing on the development of the global systemic crisis each month. And, for the first time, in the January issue which presents a summary of our anticipations for the year to come, our team anticipates a year which will not result solely in a worsening of the world crisis but which will also be characterized by the emergence of the first constructive elements of the “world after the crisis”… (page 2)
Read public announcement

USA 2012: on the way towards the tragedy of QE3
Today, US financial policy is confronted by the sovereign debt crisis of which it will be the ultimate victim in 2012. As LEAP/E2020 anticipated, the 2011 European debt detonator has truly ignited the 2012 American sovereign debt bomb, even if the media coverage desperately tries to make us believe the opposite. The massive sale of US Treasury Bills by the planet’s major central banks in the second half-year 2011 perfectly illustrates this situation incidentally… (page 7)
Subscribe

ANTICIPATIONS 2012 - ‘20-UP AND 15-DOWN’, THIRTY FIVE KEY TRENDS FOR 2012
Up or Down? The United States' political paralysis; The City and Wall Street ; The rise in interest rates; The forfeiting of value to Wall Street and the City; The value of Chinese reserves; The Pound Sterling (and Gilts); Euroland as new European sovereign; The USA-China “little cold war”; Italy; The importance of the US Dollar in world trade transactions; Rating agencies; The “great European public borrowing” (GEPB); MerkHollMont; Ron Paul; The number, size and influence of Western banks; The continuation of gold’s return in the international monetary system; Recessflation; Sarkozy, Cameron, Netanyahu and Medvedev; The BRICS maturing as a pro-active world player; Turkey’s exit from the Western camp; The Tobin Eurotax; Secular and pro-Western forces in the Muslim world; Growth; The usefulness of the G20; Lawsuits against those managing banks and hedge funds; The splitting of the world monetary system into three zones: Dollar, Euro, Yuan; The widespread downgrade of Western public debt; Peoples' anger; The Euro crisis; The EU as the principal incarnation of Europe; QE3 as the ultimate weapon for saving the US economy; The US’ capacity for military intervention; The West as a community of relevance and values; Scottish independence; Le détroit d'Ormuz et un nouveau contexte de crise au Moyen-Orient ; L'indépendance de l'Ecosse; The Straits of Hormuz and a new context of the Middle East crisis (page 19) (page 19)
Subscribe

The GlobalEurometre - Results & Analyses
We are seeing a strengthening in the majority considering that common European solutions to the crisis are more effective than national ones (80% in January versus 77% in December)… (page 33)
Subscribe

Full page