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).


(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
Marie-Helene Caillol
Lu 114007 fois

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GEAB N°86 - Contents

- Published on June 17, 2014 -

Global systemic crisis – The Major Global Geopolitical Reconfiguration
After nearly 6 years of blocking the normal development of systemic transition, a blocking caused by a flood of dollars leading to a renewed artificial global addiction to the US dollar, history is now taking its course… (page 2)
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The US 2014-2015: the dominoes of pensions, Munis and the Dollar
Numerous cracks come from the outside: for example the challenge to US dominance by China and Russia. But, amongst the most serious cracks in the Dollar wall, is the market for US municipal bonds and the US pension system… (page 19)

Central Banks – What the coexistence of QE and deflation reveals about the Western financial system
Common sense (or rather economic sense) would expect that excessive use of the printing press, especially in the US and Japan, causes inflation – if not hyperinflation given the amount of money injected into the system. And yet, it’s nothing of the kind. Are deflation and the printing press conniving in the US? Or in Europe? How can that be possible? (page 25)

Investments, trends and recommendations
Blackmail in the BNP affair
« Sufficiently big to fine »
Alternative financial investments… (page 30)

GlobalEurometre - Results and analyses
Even if some financial issues, such as the risk of bank failures or the fear of losing one’s money, seem to be less worrying, for the first time in several months we are seeing signs of a weakening in confidence in the European currency… (page 35)