LEAP/E2020 Summer 2008 Alert – July-December 2008: The world plunges into the heart of the global systemic crisis


- Public announcement GEAB N°26 (Summer 2008 Special Edition - 31 pages!) -



LEAP/E2020 Summer 2008 Alert – July-December 2008: The world plunges into the heart of the global systemic crisis
On the occasion of this 26th – Summer 2008 Special – edition of the Global Europe Anticipation Bulletin, the LEAP/E2020 team has decided to launch an alert on the July-December 2008 period. Indeed, our team is now convinced that this period will consist for the whole world in a major plunge into the heart of the phase of impact of the global systemic crisis. The upcoming six months are in fact the core of the unfolding crisis. The troubles met in the past six months were mere harbingers.

US consumer confidence index (1978-05/2008) – Source: Briefing.com / Conference Board
US consumer confidence index (1978-05/2008) – Source: Briefing.com / Conference Board
In the next semester indeed, all the components of the crisis (financial, monetary, economic, strategic, social, political… ones) will converge at the height of their intensity (1). Avoiding to repeat a description of the various sequences already anticipated in the previous editions of the GEAB, our researchers have decided to describe the trends that will be at work in the world’s main regions in the next six months. Therefore they analyse eight fundamental processes that will mark the next semester and affect decisively the years 2009-2010, i.e.:

1. A Dollar in distress (EUR 1 = USD 1.75 at the end of 2008): Panic-fear of a US currency and economy collapse eats into the American collective psyche

2. Global financial system: An impossible requirement – placing Washington under international trusteeship – provokes the system’s break

3. European Union: The periphery sinks into the recession, the Eurozone only slows down

4. Asia: The « double whammy » inflation/export-collapse

5. Latin America: Difficulties increase but growth remains steady in most parts of the region, Mexico and Argentina in crisis

6. Arab world: Pro-Western regimes go adrift / 60 percent risk of socio-political explosion on Egypt-Morocco axis

7. Iran: 70 percent probability of an attack by October 2008 confirmed

8. Banks/Speculative bubbles: When bubbles collide

In parallel, LEAP/E2020 presents five strategic advices for the intention of central banks, governments and regulatory authorities, aimed at reducing and channelling the very bad consequences of the phase of impact of the crisis.

As to private investors, LEAP/E2020 develops in this 26th issue of the GEAB, a series of 8 operational advices for them to avoid committing fatal mistakes in the course of the next semester.

For this public announcement, LEAP/E2020 chose to present its anticipation on the upcoming break of the global financial system.

Global financial system: An impossible requirement – placing Washington under international trusteeship – provokes the system’s break

Who owns the US debt? – Source: Fincher
Who owns the US debt? – Source: Fincher
Washington’s decision to raise the bids for the return to a « strong Dollar », by compelling Ben Bernanke to intervene, bears the seeds of an acceleration of the global financial system’s breaking process (2).

Ben Bernanke is indeed the last wall before the largest US currency and asset owners become fully aware of the fact that Washington no longer has the means of its monetary policy. What used to be a deliberate policy of currency drop (when it was decided to stop publishing M3 in March 2006, as announced by LEAP/E2020) in order to reduce the country’s trade deficits and the real value (for themselves) of the their debt (labelled in Dollar), turned against its perpetrators entailing a major outflow (capital outflow, steadiness of trade deficits, soaring inflation...). The « Bernanke » card is the last « psychological » card Washington can play. The fact of using it proves that US leaders have reached the last limits of what they can do to hold back their partners into the system founded after 1945 and based on the US economy and currency (3).

In a few weeks time (after the next G8- and other organisations-meetings have taken place), when it will be confirmed that there is no way to stabilise the US currency (not to mention the eccentric idea of pushing it up) because the US economy is sinking always deeper into the recession and because the world is already filled with US Dollars no one knows what to do with, then the global financial system will burst out in various sub-systems trying to survive as much as they can before a new global financial equilibrium is found (4). As he is embarking on this road to nowhere, consciously or not, voluntarily or not, Ben Bernanke is signing the end of the current financial system. The return to a “strong Dollar” is a bit like the « liberation of Iraq » : wishful thinking turning into a nightmare.

The inverted pyramid of global liquidity - Sources: Bank of International Settlements / Independent Strategy
The inverted pyramid of global liquidity - Sources: Bank of International Settlements / Independent Strategy
As a matter of fact, if Washington really intended to stabilise the Dollar or, more ambitiously, to push it up against the other currencies, there would only be one way (5), in two parts: raising significantly the Fed’s interest rates, and lowering drastically the pace of money printing. But if the government decided to implement this type of policy, the US economy (both real and financial) stops dead a few weeks after : the real estate market falls to zero by lack of affordable credit and as a result of soaring interests on Adjustable Rate Mortgage loans, consumption becomes negative (i.e. shrinks back each month), corporate failures multiply exponentially, Wall Street collapses under the burden of innumerable debts and succumbs to the instantaneous implosion of the CDS market due to counterparties default...

Such a series of events, sure to happen if Washington implements a voluntary policy of dollar-rescue, is probably unacceptable by the US authorities. Therefore, apart from talking – and further self-discrediting – they cannot do anything. The method used in the past decades is no longer available: no one will accept to buy large amounts of Dollars in order to rescue the US currency if some voluntary policy (like the one described previously) is not implemented by Washington. As they will not do it, the rest of the world will draw its own conclusions: everyman for himself, knowing that from mid-August onward, as Beijing is relieved from the constraint of the Olympic Games, a large number of “tough” options (6), put on the back burner until the Games, will resurface (7).

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Notes:

(1) For a more detailed calendar of these trends, see GEAB N°18.

(2) The Bank of International Settlements is beginning to worry about a risk of global Great Depression. Source: Banking Times, 06/09/2008

(3) Source: Euro Pacific Capital, 05/23/2008

(4) On this subject, read in GEAB N°26 our advice to central banks, governments and regulatory authorities.

(5) We will disregard the other option consisting in bombing the ECB, the Bank of China and the Bank of Japan.

(6) Source: ContreInfo, 04/21/2008

(7) As Russia is becoming the largest oil-producer - before Saudi Arabia - in the world, the balance of power on the oil market is also changing a lot. Source: Times of India, 06/12/2008

Lundi 16 Juin 2008

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)
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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)
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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)
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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)
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