GLOBAL SYSTEMIC CRISIS Press clippings
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USA-Dollar-Iran / Confirmation of Global Systemic Crisis end of March 2006
Announcement GEAB N°3 – March 15, 2006
Nine
indicators prove that
the crisis is unfolding
Nine indicators enable LEAP/E2020 to confirm the beginning
of a global systemic crisis
by the end of March 2006.
These indicators are described
in this month's GlobalEurope
Anticipation Bulletin-
coordinated by Franck
Biancheri - and
5 of them are presented
in this public communication.
Recent international trends
affecting the international
financial system in particular,
as well as preoccupying
trends in the US, namely
as concerns the reliability
of statistics on the US
economy[1],
have brought our research
team to conclude that
this global systemic crisis
is already unfolding.
M3 [2] is
really the decisive indicator
As illustrated by most
of the 5 indicators described
in the present communication,
the past weeks have confirmed
how decisive the US Federal
Reserve's decision
is to stop reporting M3 [3] on March 23, 2006. LEAP/E2020
is now convinced that
this decision portends
a period of accelerated
money-printing by the
Fed, concealed behind
public statements that
inflation in inder control,
that will result in the
collapse of the US Dollar
and the monetarisation
of US debt (public and
private), which a growing
number of US experts now
feel will never be repaid [4] given the constantly growing
gigantic amount (the US
public debt now represents
more than 8,000 [5] billions dollars, i.e.,
approximately four times
the federal budget in
2006 [6])
). According to the very
conservative Heritage
Foundation, if we also
take in consideration
the budgetary consequences
of recent decisions by
the Bush Administration
regarding health and pensions, the real debt
is USD 42,000 billions,
or 18 times this year's
federal budget, and 3
½ times the US
GDP in 2005 [7].
as well as Iran
While confirming the catalytic
role of the opening of
an Oil Bourse priced in
Euros in Iran (recent
Iranian allegations [8] suggest
that if the crisis worsens,
Iranian authorities might
simply decide to switch
all foreign transactions
to euros, following the
example set by Syria [9] a few weeks ago) and/or
that of a US and/or Israeli
attack on Iran -
probably a « surprise-attack
» conducted without
the support of the UN
Security Council [10]-,
the scope of the reaction
to the publication of
last month's LEAP/E2020
Alert has revealed a deeply-rooted
anxiety among a significant
part of the financial
system's players,
among individual actors
mostly. This impact was
particularly important
in the US from where we
received comments mainly
focused on M3, real-estate
bubble, US deficits and
US economic statistics
reliability issues. Considering
these reactions, LEAP/E2020
has decided to concentrate
this second communication
on these aspects of the
global systemic crisis,
all the more since a number
of very preoccupying facts
appeared in the past weeks.
The
real-estate bubble starts
collapsing
Some of the predictions
made by LEAP/E2020 have
already become true, including
the bursting of the housing
bubble in the US (new
home sales were down 5%
in January 2006 compared
to January 2005, the first
time in 5 years this has
happened; and the inventory
of homes available for
sale represents a 6-month
supply since 1998 [11]).
The end of the housing
bubble will progressively
impact US household consumption,
which is highly dependent
on growing mortgage-mortgage
based household debt [12].
. In parallel, the slowdown
in the housing sector
will directly affect employment,
since this sector alone
has accounted for 40%
of private jobs created
over the past five years
in the United States.
currencies of emerging
countries first ones affected
by the unfolding crisis
During the week of February
20, 2006, Iceland's
Krona was downgraded by
a credit rating agency,
which called Iceland's
credit deficit unsustainable.
The Krona instantly plummeted
10%, dragging emerging
market currencies such
as those of Brazil, South
Africa, Mexico and Indonesia [13] , down due to the speculative
positions taken by currency
speculators. During the
week of March 6, 2006,
it was the turn of Central
and Eastern European currencies [14] to plummet as a result
of excessive deficits
and the implementation
of new policies (increased
interest rates and/or
removal of liquidities)
by the European and Japanese
central banks.
Finally, since March 14,
2006, including those
in Saudi Arabia and the
UAE, have begun a nose-dive
(a 15% loss in just 24
hours, and local experts
expect a 50 to 60% drop
in the coming weeks).
and the crisis of confidence
in the US economy is playing
a key-role in triggering
a global crisis
Among the factors suggesting
that the crisis is beginning,
is the extraordinary impact
of LEAP/E2020's
February 2006 Alert itself,
which, in and of itself,
is an indicator of a high
level of concern worldwide.
In our opinion, the international
financial system, and
in particular its dollar-base [15],
now rely mainly on two
interconnected pillars:
on the one hand, the confidence
placed in the system itself
and on the other, the
statistics describing
the evolution of the systems.
In terms of the second
pillar, the worldwide
impact of the LEAP/E2020
Alert is a significant
indicator, worth analysing [16] , given the dozens of
millions of pages viewed,
the hundreds of thousands
of individual visitors
to our website, the spontaneous
translations of the Alert
into some twenty languages,
the posting of the Alert
on hundreds of websites,
reporting by the media
and comments on blogs
worldwide; and in particular,
the popularity of the
Alert in the US. All this
reflects a growing concern
about the trends in the
international financial
system. This concern is
an integral part of the
global systemic crisis
given that psychological
factors, such as confidence,
have become central in
the system.
Five
out of nine indicators
that the systemic crisis
has already begun These are five out of
the nine indicators proving,
according to LEAP/E2020,
that the system crisis
is unfolding:
1. the US
government has been in
technical default since
mid-February 2006, , because the debt ceiling
authorized by the Congress
has been breached. The
US government has suspended
sales of State
and Local Government series
(SLGS) non-marketable
Treasury Securities [17].
US Treasury Secretary
John Snow announced that,
if Congress has not approved
an increase in the statutory
debt ceiling by USD 800
billion by mid-March (i.e.,
10% of the current ceiling
of USD 8,200 billion,
which has already been
raised twice in the past
three years), the technical
default will become very
problematic.
2. Fed's
Vice-Chairman in charge
of crisis management Roger
Ferguson unexpectedly
resigned, one one week after the
publication of our February
Alert, despite the fact
that he still had eight
years to serve [18].
Roger Ferguson won high
marks for his handling
of the Fed's initial
response to the Sept.
11, 2001 attacks, while
Greenspan was in Europe.
His opposition to the
strategic choices by new
Fed's chairman,
was notorious.
3. The Bank of China,
the country's top
foreign exchange lender,
has decided to allow depositors
to buy and sell gold using
their USD in order to diversify
its holdings, today mostly
in USDs [19].
4. US public
and trade deficits continue
to increase (USD 119 billion in February
and USD 68,5 billion in
January), indicating that
non one is in control
of the current trends
which are only worsening.
The monthly deficits the
highest ever recorded.
Washington no longer tries
to talk about improvements,
but prefers to say that
these deficits do not
mean anything because
the economy has
changed. This explanation
was also used on the eve
of the collapse of the
« Internet »
bubble, couched in terms
of the new economy. [20] As
a point of interest, over
the past five years, the
US borrowed more money
from the rest of the world
than it did in its entire
history from 1776 to 2000 [21].
5. Doubts
grow even in the US on
the reliability of US
economic statistics [22], leading to counter-analyses
showing that, in the last
three years, US GDP has
in fact decreased and
not increased [23] , and that current real
inflation rates are between
6% and 12% (with direct
consequences of course
on the real profitability
of the various types of
investments).
Three different
measures of the consumer
price index:
in blue, the method used
under the Clinton-presidency,
in orange, the method
used by the Bush administration,
and in yellow, the method
currently elaborated by
US authorities.
Anticipation is
therefore really required
in order to limit the
damage
A systemic crisis expands
like a tsunami progressing
through an ocean and hitting
different coasts at different
moments. When the wave
hits a coast, the tsunami
has been formed already
long ago. An early information
is clearly the only way
to take some safety measures.
In any event, considering
the nine indicators developed
in GEAB 3, it is now clear
for LEAP/E2020 that the
crisis is entering its
triggering phase. The GlobalEurope
Anticipation Bulletin
N°3 details all
these analyses and points
at some tracks of solution
in order to help private
and public operators get
prepared to make proper
decisions.
Considering the importance
and convergence of the
trends confirming the
portended systemic crisis,
only trends as powerful
could reverse the evolution
described by LEAP/E2020.
Until today, LEAP/E2020
was not able to identify
the least of such reverse
trends. Contrary to what
some may say, «
crises happen even when
they are not of collective
interest » (WWI
or the 1929 crack already
proved that). The Iran
crisis, the Iraq civil
war, or the deterioration
of US deficits prove that
our international leaders
have no hand over the
events. It is vain to
hope that they will in
the last minute appear
as « deux ex machina
» and solve problems
that they contributed
to develop over the past
decades. Lastly, in the
event a crisis occurs,
and contrary to what happened
in the past decades, the
Dollar will not be the
reserve currency it used
to be, due to the fact
that the loss of confidence
in the US and in their
currency (including by
the Americans themselves)
is precisely one of the
components of the new
crisis.
_____________
Apart
from the analyses detailed
in GEAB
3, LEAP/E2020 would
like to give two clear
advices to the readers
of this public communication:
-
during the unfolding
of a global systemic
crisis, the main strategy
to adopt consists in
diversifying as much
as possible one's
holdings, because given
the unpredictability
of the unfolding, only
a diversification can
limit the loss. It is
important to bear in
mind the following aspect: in a context
of general crisis, the
aim is no longer to
gain more but to avoid
losing too much.
-
as regards currencies,
LEAP/E2020 noticed that
its strategic analyses
and advices concerning
the Euro were largely
read and commented at
the highest level of
the Eurozone governance
system. This reinforces
our feeling that Euroland
will be in the coming
months the only monetary
area capable of resisting
a Dollar crisis. Decision-makers have
grown aware in the proper
timing of the measures
to take on D-Day.
--------------------------------------------------------
8.
Source AFP, Vienna -
March 9, 2006: Iran "will
not use the oil weapon for
the time being because we
are not seeking confrontation
with other countries. But
if the situation changes,
we will be compelled to
change our attitude and
policy », declared
Javad Vaïdi, vice chairman
of the Supreme national
security council, in an
addresse to AFP.
10.
Russia and China confirm
their opposition to economic
sanctions as well of course
as to any military action
against Iran ( source
AP/Nouvel Observateur, 13/03/2006).
The CDU/SPD coalition in
power in Berlin would explode
in case Berlin would support
a military operation against
Tehran. In France, the public
opinion being overwhelmingly
against such intervention,
the government would in
the end be compelled to
clear itself from this option,
being in no position to
take part unless running
the risk of a major political
crisis in the country. Time
therefore plays in favour
of Tehran which maintains
its oil and monetary (euro)
threat.
15.
International rating agency
Standard & Poor's,
has just informed that 2006
conveyed a serious risk
of collapse of the dollar-value
compared to European currencies.
Source Standard & Poor's European
Economist Forecast 2006
16.
A few factual informations
may help to take the full
measure of this impact over
a month - an impact which
was a surprise for our team
itself:
-
europe202.org rocketed
to the top 1000,000 worldwide
websites ranked by Alexa.com since the publication
of the Alert
-
over 10 million page-views
on europe2020.org (source
Alexa.com )
-
similar traffics recorded
on newropeans-magazine.org,
a website which published
at an early stage the
LEAP/E2020 Alert paper
(source Alexa.com)
-
free translations of the
Alert available from the
net in more than 20 languages
(including Russia, Arabic,
Chinese
)
-
posting of the Alert in
English or French on hundreds
of websites and blogs
-
over 4,000 susbcription
to the free Europe 2020
newsletter, of which about
one half came from the
US
-
comments
(80% positive ones), 2/3
of which came from the
financial community or
from private investors,
including major investment
banks.
20.
Between 2002 and 2005, the
estimation of the net wealth
of US households increased
by 13,000 billion dollars,
i.e. by 33% over three years,
a figure surpassing by far
the 11,000 billion USD increase
previous record of this
same wealth between 1997
and 1999
i.e. on
the eve of the collapse
of the Internet bubble -
Source : US
Federal Reserve -
Z1
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GEAB N°75 - Contents
- Published on May 16, 2013 -
Systemic crisis 2013: with record stock exchange highs, the planets imminent plunge into recession
The world economy is slowing down badly and a widespread recession is looming. The various players are fully aware of it and, in the face of the challenges of an imminent collapse, countries or regions are putting various strategies in place to try and limit the consequences… (page 2)
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BoJ, Fed, ECB : with different methods, contrasting futures
In order to see the unfolding of the global systemic crisis more clearly, we must understand how the major western central banks act, the limits, the advantages, and the disadvantages of their interventions. We explain their policies in broad terms… (page 9)
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GEAB Dollar and Euro index
The traditional Dollar Index (used by the financial markets) is an unreliable indicator for forecasting US Dollar developments. Henceforth, our team will also publish the GEAB $ index together with the GEAB € index… (page 14)
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Strategic and operational recommendations
. Decoupling of paper and physical gold
. European sovereign bonds: the ECB is still the boss
. Stock exchanges: when QE rains money ! … (page 17)
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The GlobalEurometre - Results and analysis
The general tone of this month's poll is sombre, to say the least. Confidence in the capacity to manage the Euro crisis has literally collapsed this month, the fear of losing money has significantly risen … (page 18)
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Download GEAB N°75 (subscribers)
GEAB N°74 is available! Global systemic crisis: The war has been declared between the economic-political world and financialbanking interests