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Alternative Visions – Contagion – Brexit as ‘Bear-Stearns’ Financial Instability Event – 07.01.16

As Jack Rasmus predicted last week, the initial scenario for the Brexit vote is not an immediately global financial crash. The threat is more intermediate than short term. The analogy is not Brexit as a ‘Lehman Brothers’ event, the US bank collapse that ushered in the financial crash of 2008-09, but more similar to a ‘Bear Sterns’ event, the US bank that collapsed in the US early in 2008. Brexit is a warning shot fired across the bow of the global capitalist economy, not the precipitating event for another crash. Jack explains how global investors are waiting to see what happens next before dropping the other shoe. Jack reviews the likely intermediate effects of Brexit on global markets—currencies, bond rates, stocks, real investment, deflation, productivity, bank lending, consumption, and GDP. The relative effects of Brexit on economic regions are also covered: the UK, EU, US, China, EMEs. Recession in the UK will occur first, Jack explains. Europe will stagnate further. Japan’s recession will deepen, the US will enter recession in 2017 soon after the elections. China eventually will have to devaluate its currency with severe global consequences—i.e. the effects of Brexit on financial markets and real economies is just beginning. Political instability in the UK, in both conservative and labor parties is reviewed, with splits deepening in both. What Brexit also means for growing political instability for France, Spain, Netherlands, and Italy; how Brexit is penetrating the US election campaigns, as US elites and corporate push back on both candidates. Jack warns the weak spots of global capital today are Italy’s banks and Japan, where the most likely next ‘Bear Stearns’ event will emerge. Longer term, the UK currency and London as global financial center are finished as global players.

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The Yuan vs. the Dollar vs. Gold: One Step forward by China, One Step back for America? By Bill Holter

Each step forward by the Chinese to make a foothold for the yuan is one step backwards for the grip the dollar has held over the globe.  This topic has several nuances to it, let’s take a look from several vantage points.  As a spoiler, any “steps back” in today’s fiat currency world are steps toward a break in confidence.  Call it deflation …