Financial, Economic and Social Mood Update (July 1, 2013) The Dow Jones 30 Industrial Average has lost 1,000 points in the past month, but there is much more to the real story. Equity indices are crashing worldwide – notably in Europe, Japan and Brazil. An even bigger story is unfolding in the bond market. Liquidity is finally drying up, bonds are crashing and yields are going up. Investors who withdrew cash from banks and put that money into bonds are losing their shirts. Governments worldwide (notably in North America, Europe and Japan) now pay more to fund their debt than most commercial banks do. The massive stimulus package in Japan (even larger in nominal terms than that in the USA) has already flopped. The US Federal Reserve’s policy of “quantitative easing” is winding down to end entirely by June 2014 – not due to the Fed Chairman’s choice (as is reported in the news) but because the USA is finally running out of credit. Central banks follow the market – they do not lead it. Central banks merely respond to what the market dictates. And markets are driven by the collective social mood of billions of human beings – not by a few powerful individuals. Remaining tax revenues will shrivel up, and massive cuts in benefits, pensions, health care, welfare programs and employment are coming to the public sector. Government agencies, school districts, police departments and fire departments will have to cut staff en masse. Banks and insurance companies will soon fold because so many of their loans cannot and will not be paid off or even serviced (monthly debt and mortgage payments) by borrowers. Savers will lose their savings, and pensioners and beneficiaries will lose their pensions and annuities. Put your money into one of the few safer financial institutions before it is too late to do so. The recent bank “bailout” in Cyprus (one of the 27 member nations of the European Union or EU) penalized depositors with more than 100,000 Euros in the bank (roughly US $130,000) – they lost 60 percent of their savings above that amount. The end result was a 37% loss of all money deposited in Cyprus. The European Union (EU) recently passed a new rule with respect to all future bank “bailouts” in the 27 country union. Depositors and shareholders will have to surrender 8 percent of their money before the governments step in to help the banks. Once the stock market crashes I expect the actual losses to exceed 90 percent of all wealth – liquidity is simply drying up.
Posted on: Tue, 02 Jul 2013 03:35:17 +0000
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