The world situation is grim at the moment; no one can deny that. But there are plenty of hopeful developments that show the future is not written in stone and there are things that we can do to turn things around.
There are two types of people in this world: the glass-half-fulls and the glass-half-empties. The fulls see the silver lining to every gray cloud and the empties scoff at silver linings. It's the yin and yang of human nature, and, like all such dualities, we're all a little bit of both, depending on the situation.
But whichever side might be more dominant in you, one thing is for certain: locking ourselves away from the other perspective isn't healthy. It's too easy these days to get lost in the echo chamber of online opinions where we only ever read what we already believe to be true. The fulls believe everything is hunky dory because the websites they frequent and the people they talk to focus on the positives and downplay the rest. The empties are the opposite.
With that in mind, this week we're going to examine five signs that the empties are right when they say that the world is heading to hell in a handbasket. But don't worry, next week we're going to balance the equation with five signs that things are not as bleak as they might seem.
#1 - The mega-rich are getting mega-scared
You know things are bad when the big story out of Davos is that the super-rich are buying private airstrips in New Zealand. But that's exactly what news came out of Davos 2015 this year, when the jetsetting super-gophers of the powers-that-shouldn't-be descended on the Swiss ski resorts for their annual chin wag about the global economy. As The Guardian reported at the time, one jam-packed session was abuzz with former Soros henchman Robert Johnson's revelation that "I know hedge fund managers all over the world who are buying airstrips and farms in places like New Zealand because they think they need a getaway." Given that Soros was the man who predicted growing civil unrest three years ago and then paid Ferguson protesters $33 million to make it happen, we should be concerned about such talk for a number of reasons. Oh, and what else did Johnson say? "If they can get off, onto another planet, some of them would."
And it's not just hedge fund managers. Jamie Dimon is buying a Micronesian private island. Henry Paulson bought an island off the coast of Georgia shortly before he presided over the 2008 meltdown. Director James Cameron is pulling stakes in Hollywood, the town that built his billion-dollar fortune, and permanently moving to New Zealand where he's planning to become a citizen.
Those super-rich who are stuck in major Western cities are preparing by building increasingly fortified living spaces. The trend toward these high-tech fortress hideaways has been mainstream headline news for years, but now even the New York Times is running feature stories on the increasingly elaborate "panic rooms" of the 0.1%.
So what are they preparing for?
#2 - Mainstream Economists, Pundits and Analysts Are Calling For a Crash
Bill Gross, co-founder of PIMCO and certified multi-billionaire, raised eyebrows earlier this month with a particularly bleak investment outlook for his new outfit, Janus Capital Group. Entitled "A Sense of an Ending," Gross explores his own approaching mortality in comparison to the predicted end of the 35-year investment supercycle that began in 1981, and ends by saying:
As it is, in 2015, I merely have a sense of an ending, a secular bull market ending with a whimper, not a bang. But if so, like death, only the timing is in doubt. Because of this sense, however, I have unrest, increasingly a great unrest. You should as well.
And he's one of the more optimistic advisers out there. Earlier this year Ron Paul--who warned of the disastrous housing bubble on the House floor as far back as 2001--warned of the dollar bubble and the fact that America (and by extension the world) is just one geopolitical shock away from the economic brink.
Ann Pettifor, the author who warned of the 2008 collapse in her 2003 book, The Coming First World Debt Crisis, puts it bluntly: "We're going to have another financial crisis." As Pettifor point out, the recent dollar bull run has pushed a number of developing economies to the brink, the very developing countries who were supposed to be the engine of economic growth in the "new economic order" of the 21st century. As she points out: "absolutely nothing has changed since the crisis."
And in an uncomfortable parallel of Greenspan's infamous "irrational exuberance" statement of 2000, current Fed Chair Janet Yellen has come out to warn of "potential dangers" in the (QE-inflated) equities markets. Heck, Greenspan himself is now warning that there's now way out for the Fed from its QE-created nightmare other than by a "significant market event" which he defines as "either a stock market crash or a prolonged recession."
So what would happen if the bottom fell out of the markets tomorrow?
#3 - Greece is on the Edge of a Bail-in (and the rest of the world might not be far behind)
Today's 24/7 news cycle creates such a hectic flow of information that the Cyprus bail-in of 2013 seems like a distant memory. For those who don't remember, Cyprus was hit particularly hard by the 2008 Lehman meltdown and resulting crisis, not just from the slowdown in its own economy, but by the fact that its offshore-oriented banks were over-exposed to toxic Greek debt. A 50% haircut on that debt in 2011 led to serious concerns about the Cypriot banking sector and an acute liquidity crisis in the nation's financial markets. The Cypriot government, relying on an emergency loan from Russia, officially turned to the EU for a bailout in 2012. The situation came to a head in March 2013 when the government announced bank closures to prevent emergency withdrawals. When the banks re-opened a week later, a new word was added to depositors' vocabulary: bail-in.
Although hardly anyone thinks of it when depositing money in their bank account, what they are actually doing is lending that money to the bank. When banks go under, then, depositors are just another creditor looking to get their money back. During a bail-in, depositors can be asked to take a haircut on their deposits just like any other creditor of the bank. In the Cyprus case, an estimated 48% of the country's uninsured deposits (anything over 100,000 Euros) disappeared into the black hole of the Greek debt contagion.
For many at the time, this was just a quirk of an isolated country best known as an offshore tax haven. As I discussed at The Corbett Report at the time, however, the truth is that groups like the shadowy Bank for International Settlements have been constructing the infrastructure for international implementation of bail-ins for years. In 2010 the BIS (the "central bank of central banks") released a white paper proposing the bail-in of Tier 1 and Tier 2 capital in the event of future banking crises. And in recent years the BIS' even more secretive "Financial Stability Board" sub-group followed up with explicit bail-in resolution plans for financial institutions in crisis.
Now it looks like the Greek people themselves may be the next victims of this tactic, and they know it. They have good reason to be concerned: not only is neighboring Cyprus fresh in the minds of the Greek people, but in April cash-strapped Athens already forced Greece's local governments to send their reserve funds--nearly $2 billion in total, held in commercial banks and used for paying municipal pensions and salaries amongst other things--to the central bank for investment in short-term government debt. In plain English, the Greek government confiscated the reserve accounts of its own municipalities to buy itself a few more weeks respite from its creditors. Does anyone doubt that they would do the same to the banks' depositors if push came to shove during a Greek default crisis?
Well, the Greek people don't doubt it. There have been remarkable outflows from the Greek banking sector in recent months as depositors scramble to get their money out of the bank. Last month alone approximately 5 billion euros were withdrawn from Greek banks as people prepared for the now seemingly inevitable default.
We know that the bail-in regime is ready to be implemented globally. The BIS and the FSB have been laying the foundation for it. Mark Carney, the head of the FSB, former Governor of the Bank of Canada and current Governor of the Bank of England, has confirmed it. Cyprus proved it. Greece may be the next domino, and given all of the other worrying signs of systemic crisis in global markets and the precarious nature of the world's derivatives-leveraged financial institutions, the only serious question is: can Europe, the US and other "first world" Western economies avoid it?
If they don't, things are about to get much worse on the streets of our cities.
#4 - Baltimore is Just the Beginning
Baltimore has descended into chaos. With 38 homicides so far, May has been the deadliest month in the city in nearly 20 years. There are reports of gangs walking with impunity through areas of the city, brandishing weapons and threatening others without any sign of police presence. The Baltimore riots come on the back of a series of protests that have rocked the country in recent months, including the (Soros-sponsored) #BlackLivesMatter protests of Ferguson and the Eric Garner protests in New York.
What these incidents of police brutality, protest, riots and chaos in recent months has shown us is that the United States remains a deeply divided country that is simmering with racial tension, economic deprivation, and civil discontent. If an economic collapse were to happen in this environment, it is difficult to imagine that crisis as anything other than a spark in a powder keg.
During the Great Depression of the 1930s the first world was still primarily rural and agrarian. There were no electronic gadgets to distract the masses and children still played outside, the public was more engaged with their community and their neighbors and people were used to relying on themselves and their communities for feeding, clothing, and sheltering their families. In 2009 the world's urban population outstripped the rural population for the first time in human history. People in these urban environments are less connected to their neighbors and more connected to their electronic devices than ever before. Homecooked meals and family time spent in the community are increasingly rare, and food self-sufficiency (independence from the industrial-agricultural supermarket system) is almost non-existent.
Can there be any doubt that a 1930s style Great Depression would not result in rioting and chaos even worse than what we have seen in Baltimore? And is this why the government has been spending billions of dollars to militarize state and local police across the US for the past two decades? Or why the DHS has been buying up billions of rounds of ammunition? Or why the public is on a knife-edge over Jade Helm exercises that will involve military personnel going undercover in various towns across the American Southwest "play acting" a scenario involving a domestic insurgency?
But as worrying as all of this is, it might all pale in comparison to the even bigger worry during times of economic instability.
#5 - Everyone's talking about WWIII
Of course politicians, bankers and other would-be rulers of society love to misdirect public attention during times of economic crisis by staging geopolitical events and waging war. After all, WWII got the world out of the Great Depression, didn't it? (Well actually no it didn't, but don't let those pesky facts get in the way of good Keynesian propaganda, eh?)
As James Evan Pilato and I discuss on the latest edition of the New World Next Week, WWIII is in the air, with shadowy NATO sources, official Chinese media and (of course) George Soros warning that war is a virtual certainty in the near future. For those who have seen my commentary on this news, they'll know that I don't think war is right around the corner just yet...
...but in times as volatile as these, all it takes is one wrong shot at the wrong time in the wrong place to start a war that no one--not even the powers-that-shouldn't-be--planned for. China is pushing brinksmanship in the South China Sea (and, oh yeah, the US is too). The US is sending Cold War workhorse B-52 Stratofortresses to Stockholm as part of a military drill as tensions mount with Russia. The Yemen proxy war is threatening to ignite into direct warfare between Iran and the US. ISIS is moving forward under the watchful eye of its US backers. It is hard to think of a time since the height of the Cold War when there have been so many potential flashpoints for all-out global warfare.
And given the technological "progress" that has been made since the end of WWII, no one can deny that WWIII could very well be the actual, literal end of the world (or our place on it).
But it's not all bad news...
The world situation is grim at the moment; no one can deny that. But there are plenty of hopeful developments that show the future is not written in stone and there are things that we can do to turn things around. In order to have a healthy perspective, we must bring these two perspectives together. Stay tuned for next week as we examine the five signs that the world isn't ending after all...