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The global contagion is spreading so quickly, it could strike the United States before yearend.
It’s the same contagion that began over two years ago in Greece … that hit Ireland and Portugal last year … that slammed into Italy last month … and is now striking down a fifth country: Spain.
Think Spain is too small to be a major factor in our markets? Think again!
Spain’s economy is double the size of Greece’s, Ireland’s and Portugal’s COMBINED.
Spain’s total debts, including mortgages and commercial loans, are large enough to bankrupt all of Europe.
Even if the United States manages to escape a direct contagion attack for a while longer, the impact of Spain’s demise ALONE will explode on global financial markets with a mega-tonnage that’s many times larger than anything we’ve seen so far from Greece.
Worst of all, Spain has simply run out of time. Its death spiral is under way; its plunge into default, virtually unavoidable.
Here are the horrifying facts …
Spain’s unemployment has skyrocketed to 22.6 percent; and among workers under 25, to an astronomical 48 percent!
At least one million people are at risk of losing their homes — the equivalent of nearly seven million people in the U.S.
Homelessness and begging are rampant; labor strikes and street protests, endemic.
And now, the final blow: Global bond investors are dumping Spanish bonds like a hot potato, driving Spain’s borrowing costs through the roof:
Just in the last few weeks, as the contagion of fear struck Spain, global investors have dumped Spanish bonds in wave after wave of panic selling, driving their prices down and their yields to the highest level in euro history.
Result: The Spanish government now has to pay nearly five full percentage points more than Germany for 10-year money. That’s nearly quadruple the peak level reached during the 2008 debt crisis … and beyond the levels that triggered the collapse of Greece.
Worse, last week, the Spanish government suddenly found itself paying through the nose even for short-term money — a whopping 5.11 percent on its 3-month Treasury bills. That’s more than double what Spain paid just one month earlier … and over FIFTY times more than what the U.S. Treasury pays.
The Ultimate Day of Reckoning
Just a few days ago, investors were hoping that confidence in Spain’s new incoming leader, Mariano Rajoy, might turn the tide. But it had the opposite effect: Investors now realize that a simple changing of the guards — whether in Greece, Italy or Spain — does nothing to fix the debt problems, and can actually make things worse.
Regardless of new leadership, bond investors have continued to sell, driving borrowing costs through the roof. And surging borrowing costs have emerged as THE event that marks the beginning of the end.
Why? Because it’s THE critical moment in time when global investors pull the plug!
It’s when they refuse to lend a penny more without charging outrageous rates … when the country runs into a stone brick wall, unable to continue borrowing from Peter to pay Paul.
It’s the ultimate day of reckoning — the same day of reckoning we saw come to Greece, Ireland and Portugal … but with one very big difference:
Those three countries were small enough to be bailed out without catastrophic repercussions for all of Europe. Spain is not. It’s far too big.
It’s also the same day of reckoning that’s coming to the United States, but with an even bigger difference: There is no country or institution on the planet rich enough to bail out America.
Almost everywhere in the world, especially
in the United States and Europe, the pattern is clear:
First, the government spends everything it has.
Next, the government borrows all it can from its people.
Then, it borrows still more from foreign countries and banks.
Finally, the debts become so onerous that they bring on the contagion — the day of reckoning — we’re witnessing now.
Yes, America is still the richest country in the world. But that has merely enabled America’s leaders to take the greatest and most dangerous risks in the world.
In fact, you could argue that, in some key aspects, the U.S. is now in WORSE shape than Greece, Ireland, Portugal or Spain have ever been.
Why? One reason is because of a very risky kind of speculation that is extremely popular among the largest American banks.
The world’s most famous American investor, Warren Buffett, calls these speculations “financial weapons of mass destruction.” I’m talking about special kinds of investments called “derivatives.”
These investments were a major cause of the great financial crisis of 2008 and 2009. They nearly destroyed America’s largest banks and the entire U.S. economy. So you’d think that, after the 2008 financial crisis, U.S. banks would have learned their lesson.
But you’d be wrong.
According to the Comptroller of the Currency, a division of the U.S. Treasury Department, U.S. banks held $176 trillion in derivatives at the height of the debt crisis in 2008. Today, U.S. banks hold $249 trillion in derivatives — 41 percent more. That fact alone places the U.S. in greater danger than many smaller countries.
America is also in great danger for another big reason: The U.S. is now sitting on the largest pile of federal government debt in the history of civilization — $15 trillion.
That doesn’t even include all the debts of U.S. government agencies like Fannie Mae and Freddie Mac. And it doesn’t even BEGIN to include the debts the U.S. government owes to retired Americans for Social Security and Medicare.
Add all of the U.S. government debts and obligations, and you’ll see how truly big they are: Over $120 trillion!
But it’s not just the sheer size of
America’s debt that’s so frightening.
It’s the fact that it’s growing so rapidly — at a speed that’s far greater than anything we’ve ever seen before: AT LEAST $1 trillion each and every year.
Now, at this point, you’re probably thinking: “But surely — Washington will ultimately do the right thing and STOP bankrupting America — right?”
But the reality is that Washington has consistently made the opposite choice.
The die was cast in 2008, when the U.S. housing bubble burst and giant American banks were going bust.
At the time, the U.S. government could have simply allowed those who had made the big gambles to suffer the natural consequences of their actions. Instead, Washington bailed out the banks, absorbed those bad debts, and spent trillions of dollars to fight the recession.
Some people thought that was a good idea. But look what happened:
In just 12 months between 2007 and 2008, Washington TRIPLED the federal deficit from $161 billion to $459 billion.
Of course, Washington swore that this was a one-time-only event, needed to fight the recession. Well, they lied. The U.S. tripled the deficit again … to $1.4 trillion in 2009.
Then, AGAIN, they solemnly promised that this, too, was temporary — for “emergency purposes only.” But that was a lie, too. The 2010 deficit was $1.3 trillion. It’s even larger in 2011. And, in a double-dip recession, the deficit could surge to $2 trillion dollars.
Then, came the great debt ceiling debate that paralyzed Washington this summer. What did they do? They kicked the can forward to November, selecting a “Super Committee” to do the dirty work. And what did the committee produce? Nothing but a super-FAILURE!
All these debts, lies and failures are what inevitably lead to the contagion that we’ve already seen strike the PIIGS countries — Portugal, Ireland, Italy, Greece and Spain … and that is now on the near horizon for the United States.
Still skeptical?
Then consider this: In the past, the United States government always borrowed nearly all the money it needed from its own citizens. But in recent years, it has borrowed most of the new money from investors in other countries — especially China.
In fact, the United States now owes foreign investors over $4 trillion dollars. That’s more than four times MORE than it owed foreign investors when the U.S. plunged into recession in the early 2000s.
What’s next?
In most PIIGS countries, what came next was a sudden hit to the economy.
Their economies were already in a weakened state due to the debt crisis of 2008-2009. Then, adding insult to injury, they’ve been forced to take Draconian measures to cut jobs, salaries, pensions, health benefits, and more.
The United States is following a similar pattern: Despite the massive amounts of money Washington has thrown at the economy, the recovery has been the most anemic in modern history.
And now, just like the European countries in trouble, instead of pumping money into the economy with more stimulus, the U.S. government will have no choice but to take money OUT of the economy. Result: A vicious cycle of economic decline and the flight of capital.
Look: Throughout history, we’ve learned that when a nation becomes this deeply indebted and in this much economic trouble, the next step is always the same: In every case, the next step is the contagion that has already struck PIIGS countries.
That’s when the U.S. government can no longer borrow and simply runs out of money. That’s the moment when all hell breaks loose in America — just as it has in other countries.
I’m talking about a sudden rejection of U.S. debt by the world’s investors — an international creditors’ revolt that makes it almost impossible for the United States government to borrow.
What will happen when global investors abandon the United States? The answer is chaos — a collapsed economy, a society in turmoil and a government that’s so desperate to save itself it could resort to some of the most extreme measures in modern times.
Still finding all this hard to believe? Then consider the ten former chief economists who advised U.S. presidents. They are the chairmen of the White House’s Council of Economic Advisors. All of them have since departed from their office, but they recently wrote that that the next debt crisis could “Dwarf 2008!“
That’s an absolutely shocking assertion: In 2008, the United States and almost the entire world came within a hair of a massive, devastating meltdown. Most of America’s and Europe’s largest banks were pushed to the brink of failure. The entire economy of the West was only a few hours away from a fatal collapse.
Now, these ten former White House advisors are warning that this next debt crisis could dwarf the last one. Why? What could cause that?
The answer: They say it’s precisely the contagion I just told you about: The fact that it may become next to impossible for the U.S. government to borrow any more money from global investors.
And these ten former presidential advisers are not the only ones ringing the alarm bells.
U.S. Senator Mark Warner says the United States is “approaching financial Armageddon.”
Senator Joe Manchin calls this crisis “A fiscal Titanic.”
Admiral Mike Mullen, the head of America’s military command, the Joint Chiefs of Staff, is warning that this crisis is “the biggest threat to our national security.”
And David Walker, the former chief auditor of the United States government, says: “The bottom line is: We’re not Greece. But we could end up with their same problems!”
These men are not extremists. They have nothing to gain by trying to scare people. They are merely following the facts to their logical conclusion. And that’s what I’ve done here.
The warnings I’ve given you are based on nothing more — and nothing less — than economic reality and historical fact. My research team and I have simply analyzed the numbers and told you the truth — just like we did when we issued “D” ratings on nearly every big bank that subsequently failed.
We have no political agenda. We are not affiliated to any political party or government in the United States or elsewhere. We have no national bias for or against any country. We also have no relationship with the tens of thousands of companies or countries that we rate.
In fact, most of them would probably prefer that we just kept our mouths shut. One giant company even threatened my life by saying “Weiss had better shut up or get a bodyguard.”
But as President Harry Truman once said, “I never give them hell. I just tell them the truth and they think it’s hell.”
Our loyalty is with the people — consumers, savers, investors and everyday citizens in every country of the world. We are loyal to the people who rely on us to tell them the truth about what we see in the future, and about the companies or governments they entrust their money to, invest in, or do business with: The good, the bad and the ugly.
This is how my company has become the last line of defense for the average person against greedy CEOs, power-made politicians and corrupt officials everywhere.
And this is why, in just a moment, I am going to give you the steps you need to take to prepare, and I am even going to NAME the global banks most likely to fail.
Nevertheless, if the crisis I’ve just described is hard for you to imagine, I certainly understand.
Most people think the United States is so strong and powerful, it will never experience this kind of crisis. For most people living in advanced countries, things still seem so “normal” — so routine.
It’s hard for them to imagine that such terrible things could happen — and that it could all happen so quickly, in the twinkling of an eye. But isn’t that always the case? Isn’t there always a calm before the storm? Aren’t people always caught by surprise when historic crises strike?
After all — nobody believed the Soviet Union would collapse virtually overnight — and when it did, it caught everybody by surprise. Even the C.I.A. failed to see that one coming!
And remember, for years, Islamic extremists made no secret of their determination to knock down the World Trade Center. They actually tried to do it in 1993. But among the thousands who streamed into the World Trade Center on September 11, 2001, how many — if any — believed they had anything to worry about?
Many of them, including my cousin’s own daughter and some friends, just kept going to work as they always had — and thousands paid the ultimate price.
In Japan, even though they had been repeatedly warned, nobody — including my own son, who lives in Tokyo — believed the nuclear power plants would suffer multiple meltdowns. And once again, their denial was costly in the extreme.
Even in my own 40-year career as a financial analyst, I’ve seen denial exact a hefty price over and over again.
A few years ago, for example, only a handful of people believed our senior analyst Mike Larson when he repeatedly warned that the real estate bubble was about to burst.
And of course, very few listened when we warned that Lehman would go belly up and that even the almighty Bank of America would come within an inch of its life.
So I’m under no delusions here. I know that the vast majority of people around the world will fail to heed this warning and fail to get ready for this crisis.
I sincerely hope — for your family’s sake — that you are not among them. Because the precautions required to weather the coming tempest are not difficult.
And even if the storm turns out to be less severe than I fear it may be, the worst that’ll happen is that you’ll sleep better at night and you could make some money in the process.
So WHEN should you expect to see this cataclysmic event — the moment when Washington runs out of money? Soon. VERY soon.
Last week’s super-failure of the Super Committee has demonstrated — for the entire world to see — Washington’s utter incapacity to deal with its deficits. And in the months ahead, efforts to avoid the automatic budget cuts will send an even uglier signal.
Result: The contagion of massive selling by global investors will hit our shores.
Here are the steps I recommend you begin taking immediately to protect yourself and your loved ones from the coming storm …
STEP #1 is to prepare your defenses:
If you count on your government for anything, you’ll need to plan to do without it. As we’ve already seen even in some of the world’s most advanced countries, governments will have no choice but to cut spending as this crisis unfolds.
That means you’ll need a plan for getting by on your own — without help from government agencies that pay pensions, health expenses or other government programs.
It would also be a good idea to make preparations to ensure your family’s physical safety. If you live in any large city, have a plan and a place to go if living there becomes uncomfortable for you.
STEP #2 is to make sure your bank
is the safest one you can find.
Keep this in mind: Washington — and even some of the richest governments in the world — may no longer be able to bail out your bank if it fails.
But in this regard, there’s even more I can do to help. Weiss Ratings is the world’s leading provider of independent ratings on 16,000 banking institutions.
Since 1990, we have issued grades on a total of 1,533 banks that subsequently failed. On 90 percent of those banks, we issued a clear warning to consumers ONE FULL YEAR ahead of time. And on nearly all of the rest, we issued a warning or a caution flag at least a few months before the failure.
Now, the problems in the global banking industry have gotten a lot worse. Just in the United States alone, 49 relatively big banks and thrifts with assets of $1 billion or more, have failed in the last two years. We issued an advance warning on every single one.
So it’s important that you make sure you are NOT using any of the weakest global banks on our list. Those include:
• Bank of America (U.S.)
• Bank of Ireland (Ireland)
• Barclay’s (UK)• Commerzbank (Germany)
• Credit Agricole (France)
• JPMorgan Chase (U.S.)• Lloyds Banking (UK)
• Mitsubishi Bank (Japan)
• Royal Bank of Scotland (UK)• Société Générale (France)
• Unicredit (Italy)
• And many others.
Regardless of any government bailouts, if you are currently doing business with any of these banks, I’d recommend that you switch most of your money to a more stable institution right away.
I’m talking about a bank with a rock-solid balance sheet, with high lending standards, and without those time bombs in their portfolio called derivatives.
Banks like that have the financial strength to see you through no matter what happens!
And here, too, we can help — because Weiss Ratings also has a nearly flawless record of identifying the truly safest banks. So to help you get your money through this crisis unscathed, I want to make sure you are taking advantage of the free services we offer you as a loyal subscriber.
To check YOUR bank’s safety, go to www.weisswatchdog.com.
And to find the safest banks, go to www.weissratings.com.
STEP #3 is to own mankind’s greatest crisis hedge — GOLD.
Since we first began recommending them in 1999, gold bullion coins and bars have risen by 450 percent. An initial investment of $10,000 is worth $55,000 today, and gold has even risen dramatically against some of the strongest currencies in the world.
Just since 2008, gold bullion coins and bars have more than doubled in value against the U.S. dollar.
So we strongly recommend that you hold a reasonable portion of your ready money in physical bullion — mostly smaller denomination bullion coins.
STEP #4 is to hedge against financial losses — with investments designed to spin off substantial profits when the economy implodes.
You don’t need a Ph.D. in economics to know that the crisis I’ve described in this presentation is not going to be good for most stock markets. So your first priority as an investor is to make sure that you do not own the stocks that are most likely to plunge.
And one of the services we provide is a powerful free tool you can use to help decide precisely which ones they are — www.weisswatchdog.com.
Your second priority is to harness the power of those declines — not merely with a special class of investments that rise in spite of the declines, but with things that soar because of them!
Examples: Inverse ETFs in the weakest countries and sectors or even put options.
Step #5 — the most important of all: No matter what you invest in, favor safety and prudence.
Good luck and God bless!
Martin
{ 20 comments… read them below or add one }
This article contains an important error of fact. The contagion did not start 2 years ago in Greece. The contagion started 4 years ago in the USA
anton
There are many views on when this started going back many more than four years ago. When governments believe that sovereign debt is an acceptable formula for contintinued existance they are deluding themselves. When these same governments believe that to get a drunk sober he should have another drink then their leadership is toxic. This is not about whose fault it is, it is about fixing the system up and at the moment the world we all live in, does not have any real leadership. The sane ones are trying to protect the global social fabric so that we have something left. But we need to prosecute fraud. It is only with the iron fist of policy correction that we will all have more confidence.
Have you ever considered drawing up a list of recommendations for governments as to what they should do?
When the contagion finally gets to the U.S. won’t the Federal Reserve simply “print” up all the money required to fund the U.S. government’s continued deficit spending? Wouldn’t this keep interest rates low and keep this game going on forever?
Then US become another Zimbabwe
“won’t the Federal Reserve simply “print” up all the money required to fund the U.S. government’s continued deficit spending? Wouldn’t this keep interest rates low and keep this game going on forever?”
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You desperately need to bone up on Weimar Germany, Jim. Here’s a link http://www.historyhome.co.uk/europe/weimar.htm (note the table and preceding paragraph)
Hint: Had you tucked a crisp, fresh one dollar bill under your mattress in 1916, it would be worth 3 cents today (and falling fast due to the printing of currency).
When is the U.S. not going to be a rich country?It seems like,no matter how much debt we have and how much our infrastructure declines,we are somehow,still the richest country in the world.Maybe we aren’t that rich and maybe we can’t continue with our inefficient,wasteful govt spending on military and domestic welfare programs.Politicians,especially Democrats,continue telling ignorant citizens that they can have something for nothing.The bills will be paid by govt.Govt has nothing to give.They only give to some by taking from others,through taxes and inflation.There is so much inefficiency,waste and fraud involved in govt spending that I estimate,they need to take a Dollar out of the economy to spend .50.So,the recent failure of the committee,resulting in all spending cuts,should be good for the country.
I beleave Dr. Weiss is refering to sovereign (Governments) contagion as opposed to private sector (Banks and Insurance Co.) contagion.
“What will happen when global investors abandon the United States? The answer is chaos”, you forgot to mention the US will just start bombing them! The US (military industrial complex) is hellbent on ruling the world and will not go down without taking the rest of the world with them. And yes the FED will just keep printing money for that to happen.
Forget inverse ETFs, or PUT options, they are derivatives that are not safe either. Who you gonna put your PUT to when it’s sky high, liquidity dries up and market makers collapse?
Thank you for all your advise. Without been an expert, I agree with you totally.
As I think the road we are transiting and the consequences are the ones you tell, the other thing to do, additionally to the savvy preparation you propose, is analyze what would happen when the inevitable comes.
So, money (Dollars and most of the currencies) would be worth nothing (in comparison with today). Even having large cash amounts in the good banks –and been able to withdraw it- would not save you from losing its value.
Where then to allocate the money? Some in safe but unproductive gold or other precious minerals?. What about the remaining? Would you allocate in real estate (that’ll produce some, even in difficult conditions); shares in companies better prepared to survive the crisis. And, that’s it.
And, in the other hand. Government struggles to “survive” without damaging too much its image. What about if we, the people, push it to “give up” in the fight of controlling the stampede of the investors and decide there are not enough investors to purchase it and that the situation will not last.
Then Congress can “call” the FED to increase the “printing”, pay everybody at maturity (or earlier if chosen by the debt holder).
And next, to define the new rules.
We all know, US has the infrastructure already installed, like nobody. China, as prosperous as it is, depends on their exports –under the rules they impose the debtors, like US- to built it.
As consequence of the above mentioned, nobody will have economical power over America, and we’ll return to our position (a lot of countries would follow or try to follow US in this, but except from some European countries, and Japan and couple other far east countries, everybody else will need to borrow to keep building themselves. And America would be, again, the lender.
well — I basically get the idea! I been reading Martin for six yrs and he’s been pretty spot on about the status of things.
Why doesn’t planet earth declare bankruptcy and start over? That will collapse the markets but so what? The planet needs a true market system do-over that is not driven by Greed and Fear. I hope we don’t have to go through WWIII, IV, and V to get there.
What a nice rise to the markets today. The Weiss bears must be fuming. Whoever heeded their advice is now looking at big losses. I always do the opposite of what they recommend and it’s worked out beautifully.
mombo like contagion…Mombo very wealthy from contagion….mombo put money in mutual fund in May 2009….Mombo got in at 12 dollars…mombo’s mutual fund is now at 42…….that is only one play by mombo since…
Mombo says this was the same time Martin and Boy Blunder we’re advising to sell everything…
mombo do opposite of Martin and Boy Blunder and done did very good…
welcome back Frances….glad to see the Weiss censors didn’t keep you away too long.
The whole problem is that Dr. Weiss, Mike Larson and company had no idea that our government was going to impart on a very corrupt and dangerous path; not like back in 1929. The folks we have running out government (democrats and republicans) are hell bent on destroying our currency to try to vaporize our debt. They have secret meetings with world leaders, plan crazy schemes, tell each other fake shit about what they are going to do, like people have done for thousands of years. I know a guy that was in the USSR right before it collapsed and it was just like this. Then the stores were empty, the folks were fighting and eventually it all calmed down.Don’t get caught in the cross-fire. Stay safe and get out of this market. I don’t quite know what you should buy, but I suggest a gun.
This market is fixed and being manipulated by the same folks the Tea Party and the Occupy Wall Street protesters have identified as the problem, but they have all the catds and the money and you can not stop these bastards. Just step aside and let them impale themselves on greed. It’s what they always do!
Just checked the Dow bear ETF this morning and DXD is going to open at a new 52-wk low. Once again, I am making money doing the opposite of what the Chairman recommends in his weekly Monday column.
Manuel, I guess John Corzine is a loyal subscriber. I wonder if any of those folks over at MF Global will ever get their money back, or did all of it go towards the continued war on the constitution and to promote Marxism? All I know is…I live out with the “real people” (as opposed to the fake crap the media proposes as reality), and they are not real happy about this whole situation; I mean like, “really not happy”.
“Islamic extremists knocked down the World Trade Center”: are you sure??? Any proof?? Such as, some probing for explosives of the rubble, for example??? Did anyone do that?
The worlds answer to this crisis may a one world economic system and eventually one world government,