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Insider

The Breakdown Has Begun

A wave of defaults is about to crash over us
Tuesday, February 9, 2016, 12:26 AM

Executive Summary

  • Oil patch defaults will be the trigger that burns down the markets
  • Defaults will ripple widely across many industries and sectors
  • The banks are suddenly turning on their central bank brethren
  • How to protect yourself from the coming era of wealth destruction

If you have not yet read The Return Of Crisis, available free to all readers, please click here to read it first.

Oil Troubles

The financial sector may be suffering through a bad time, but the oil sector is experiencing something far worse. While overall demand for petroleum is flat or down nearly everywhere, every producer is pumping like mad either to achieve a geopolitical agenda (as with Saudi Arabia and Russia) or to simply survive.

This chart of the price of WTIC oil also sports a pretty convincing head and shoulders formation, a common warning of “lower prices dead ahead”:

It looks like the $30 mark is the area to keep a close eye on, as that represents one possible ‘neckline’ to the H&S formation drawn above.  If that fails, look out below. Expect that area to be defended pretty vigorously by those institutions long oil.

I'm anticipating quite a skirmish over the $30 mark. But ultimately, I believe oil prices have further to fall. I think this because the economic news is dismal – no growth, only contraction right now and that’s going to hit demand – and also because the US has too much of the stuff to store. And because the next... » Read more

Insider

George Tsartsianidis | Dreamstime.com

More Sovereign Defaults Are Coming

Prepare for the turmoil beforehand
Friday, July 10, 2015, 11:47 AM

Executive Summary

  • Energy plays a key role in sovereign economic (un)sustainability
  • The export boom is imploding
  • The neofeudal model is collapsing as 'serf' nations enter default
  • Take preparation now, while it still matters

If you have not yet read Part 1: Why Greece Is The Precursor To The Next Global Debt Crisis available free to all readers, please click here to read it first.

In Part 1, we examined the core dynamics that expanded Greek debt to its current unmanageable size—currency/trade deficits and bailouts—and the enormous transfer of private bank debt to the public ledger via the Troika bailouts, only 10% of which trickled down to the Greek people.

There are two other dynamics beneath the surface theater, dynamics which are not unique to Greece but are characteristic of the most heavily indebted nations.

Food and Fuel Imports Drive Structural Imbalances and Debt/Currency Crises

In our recent podcast, Chris mentioned this chart of imported energy by nation. Note that the nations with crushing structural debt loads (the so-called PIIGS—Portugal, Ireland, Italy, Greece and Spain) also happen to be major importers of energy.

What does this have to do with Greece’s debt crisis? Let’s go back to the key driver of Greek debt—imports that far exceeded exports, not occasionally but structurally, year in and year out.  Money was borrowed to pay for those imports, interest accrued on the loans and then austerity was pressed on the debtor nations by the lenders as a means of extracting interest on the rising debts.

If a nation does not generate a significant percentage of its own energy and food needs, or export enough goods and services to offset its imports of energy and food... » Read more

Blog

Peak Prosperity

Debt - Crash Course Chapter 13

There's just too damn much of it
Friday, September 12, 2014, 9:04 PM

The fundamental failing of today's global economy can be summarized simply: Too Much Debt

We have taken too much of it on, too fast, in too many markets around the world, to have any hope of making good on it. Not only does the math not work out, but also on a moral level » Read more

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This chapter of the new Crash Course series has not yet been made available to the public.

Each week over the rest of 2014, in sequential order, a new chapter will be made publicly available (we've currently published up to Chapter 12)

If you don't want to wait, you can:

 

 

 

 

Insider

Europe's Mexican Standoff

All's fine until someone blinks
Tuesday, November 20, 2012, 3:08 AM

Executive Summary

  • Germany is unlikely to break solidarity with the rest of the Eurozone while Merkel remains in charge. But she may not last as long as she'd like.
  • France's economy is deteriorating at an alarming rate.
  • Most of France's "stability" to date is due to inflows of money fleeing Spain and Italy. That will stop soon – and then what?
  • The UK is suffering from many of the same ills as the U.S. However, its banks are too dependent on Eurozone debt for it to take drastic counter-measures, and so it is handcuffed to the future of the Continent.
  • All is well as long as no one defaults or no one leaves the Eurozone. With each player's position deteriorating, how long can the status quo last?

If you have not yet read Europe Is Now Sinking Fast, available free to all readers, please click here to read it first.

In previous articles, I have given Peak Prosperity's enrolled members the lowdown on the weak Eurozone governments and looked at the crisis from Germany’s point of view. With respect to Germany, all that can be added is that her political elite is still frozen in inaction and show no signs of snapping out of it. Mrs Merkel, particularly, is still pursuing the out-of-date Euroland ideal. It is as if she has decided that she has no alternative. Come what may, it will have to succeed in the end, and she is not going to be the one who calls “uncle.”

I don’t know how these things work in Germany, but in the UK there comes a point where “the men in grey suits” metaphorically tap the leader on the shoulder and politely instruct him or her to resign. It happened to Mrs Thatcher, and unless she has a change of heart, it could happen to Mrs Merkel before next November’s German elections. And when that happens, the withdrawal of Germany from the euro can be expected to begin.

In this article we will update the deteriorating situation in two other key players on Europe's chessboard: France and the United Kingdom. And we'll reveal why the current system is like a Mexican standoff: Everything is stable until someone makes a move. Then all hell breaks loose... » Read more

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Now we enter Part Two of the Crash Course. With the background you’ve received thus far, you are now positioned to understand how the Three “E”s - the Economy, Energy, and the Environment - intersect and seemingly converge on a very narrow window of the future - the Twenty-Teens. The next twenty years are going to be completely unlike the last twenty years.

For you and me, there are only two ways to settle a debt: 1) Pay it off or 2) default on it. If you have a printing press like the government does, a third option exists: 3) Printing money to pay for the debt. So what is debt, really? Debt represents future consumption taken today.

Our entire economic system, and by extension our way of life, is founded on debt, and debt is founded on the assumption that the future will always be bigger than the past. Therefore it is utterly vital that we examine this assumption closely, because if this assumption is false, so are a lot of other critical things that we may be taking for granted.