In the last article, we discussed the impact of what a declining energy consumption may lead to. In this article, we will discuss the danger of rising interest rates – the reason of it, and its implications on the global economy.
Since the creation of the US Federal Reserve over a century ago, every major financial market collapse has been deliberately triggered for political motives by the central bank. The situation is no different today, as clearly the US Fed is acting with its interest rate weapon to crash what is the greatest speculative financial bubble in human history, a bubble it created. Global crash events always begin on the periphery, such as with the 1931 Austrian Creditanstalt or the Lehman Bros. failure in September 2008. The Fed rate hikes, with financial markets are already in a meltdown, now guarantees a global depression and worse. The extent of the “cheap credit” bubble that the Fed, the ECB and Bank of Japan have engineered with buying up of bonds and maintaining unprecedented near-zero or even negative interest rates for now 14 years is beyond imagination. What is coming now in the coming months, barring a dramatic policy reversal, is the worst economic depression in history to date.
Globalization
The political pressures behind globalization and the creation of the World Trade Organization ensured that the advanced industrial manufacturing of the West, most especially the USA, could flee offshore, “outsource” to create production in extreme low wage countries. No country offered more benefit in the late 1990s than China. China joined WHO in 2001 and from then on the capital flows into China manufacture from the West have been staggering. So too has been the buildup of China dollar debt. Now that global world financial structure based on record debt is all beginning to come apart.
When Washington deliberately allowed the September 2008 Lehman Bros financial collapse, the Chinese leadership responded with panic and commissioned unprecedented credit to local governments to build infrastructure. Some of it was partly useful, such as a network of high-speed railways. Some of it was plainly wasteful, such as construction of empty “ghost cities.” For the rest of the world, the unprecedented China demand for construction steel, coal, oil, copper and such was welcome, as fears of a global depression receded. But the actions by the US Fed and ECB after 2008, and of their respective governments, did nothing to address the systemic financial abuse of the world’s major private banks on Wall Street and Europe, as well as Hong Kong.
The August 1971 Nixon decision to decouple the US dollar, the world reserve currency, from gold, opened the floodgates to global money flows. Ever more permissive laws favoring uncontrolled financial speculation in the US and abroad were imposed at every turn, from Clinton’s repeal of Glass-Steagall at the behest of Wall Street in November 1999. That allowed creation of mega-banks so large that the government declared them “too big to fail.” That was a hoax, but the population believed it and bailed them out with hundreds of billions in taxpayer money.
Since the crisis of 2008 the Fed and other major global central banks have created unprecedented credit, so-called “helicopter money,” to bailout the major financial institutions. The health of the real economy was not a goal. In the case of the Fed, Bank of Japan, ECB and Bank of England, a combined $25 trillion was injected into the banking system via “quantitative easing” purchase of bonds, as well as dodgy assets like mortgage-backed securities over the past 14 years.
Quantitative Madness
Here is where it began to go really bad. The largest Wall Street banks such as JP MorganChase, Wells Fargo, Citigroup or in London HSBC or Barclays, lent billions to their major corporate clients. The borrowers in turn used the liquidity, not to invest in new manufacturing or mining technology, but rather to inflate the value of their company stocks, so-called stock buy-backs, termed “maximizing shareholder value.”
BlackRock, Fidelity, banks and other investors loved the free ride. From the onset of Fed easing in 2008 to July 2022 some $6 trillion had been invested in such stock buybacks, creating the greatest stock market rally in history. Everything became financialized in the process. Corporations paid out $3.8 trillion in dividends in the period from 2010 to 2019. Companies like Tesla which had never earned a profit, became more valuable than Ford and GM combined. Cryptocurrencies such as Bitcoin reached market cap valuation over $1 trillion by late 2021. With Fed money flowing freely, banks and investment funds invested in high-risk, high profit areas like junk bonds or emerging market debt in places like Turkey, Indonesia and China.
The post-2008 era of Quantitative Easing and zero Fed interest rates led to absurd US Government debt expansion. Since January 2020 the Fed, Bank of England, European Central Bank and Bank of Japan have injected a combined $9 trillion in near zero rate credit into the world banking system. Since a Fed policy change in September 2019, it enabled Washington to increase public debt by a staggering $10 trillion in less than 3 years. Then the Fed again covertly bailed out Wall Street by buying $120 billion per month of US Treasury bonds and Mortgage-Backed Securities creating a huge bond bubble.
A reckless Biden Administration began doling out trillions in so-called stimulus money to combat needless lockdowns of the economy. US Federal debt went from a manageable 35% of GDP in 1980 to more than 130% of GDP today. Only the Fed Quantitative Easing, buying of trillions of US government and mortgage debt and the near zero rates made that possible. Now the Fed has begun to unwind that and withdraw liquidity from the economy with QT or tightening, plus rate hikes. This is deliberate.
Energy drives the collapse
Sadly, the Fed and other central bankers lie. Raising interest rates is not to cure inflation. It is to force a global reset in control over the world’s assets, its wealth, whether real estate, farmland, commodity production, industry, even water. The Fed knows very well that Inflation is only beginning to rip across the global economy. What is unique is that now Green Energy mandates across the industrial world are driving this inflation crisis for the first time.
The global shortages of fertilizers, soaring prices of natural gas, and grain supply losses from global draught or exploding costs of fertilizers and fuel or the war in Ukraine, guarantee that, at latest this September-October harvest time, we will undergo a global additional food and energy price explosion. Those shortages all are a result of deliberate policies.
Similarly, the European Union has decided to phase out Russian oil and gas with no viable substitute as its leading economy, Germany, moves to shut its last nuclear reactor and close more coal plants. Germany and other EU economies as a result will see power blackouts and natural gas prices will continue to soar.
Fed has pulled the plug
With the Fed rate hikes, from 0.25% to 5% today, and promise of more to come, the US central bank has now guaranteed a collapse of not merely the US debt bubble, but also much of the post-2008 global debt of $303 trillion. Rising interest rates after almost 15 years mean collapsing bond values. Bonds, not stocks, are the heart of the global financial system.
With rising US mortgage rates, home sales are plunging. US corporations took on record debt owing to the years of ultra-low rates. Some 70% of that debt is rated just above “junk” status. That corporate non-financial debt totaled $9 trillion in 2006. Today it exceeds $18 trillion. Now a large number of those marginal companies will not be able to rollover the old debt with new, and bankruptcies will follow in coming months. The cosmetics giant Revlon just declared bankruptcy.
The highly-speculative, unregulated Crypto market, led by Bitcoin, is collapsing as investors realize there is no bailout there. The Crypto world went from a $3 trillion valuation to less than half, and with more collapse underway. Even before the latest Fed rate hike the stock value of the US megabanks had lost some $400 billion. Now with stock market further panic selling guaranteed as a global economic collapse grows, those banks are pre-programmed for a new severe bank crisis over the coming months. The economy is loaded with “subprime” junk bonds, leveraged loans, buy-now-pay-later, auto, credit card, housing, and solar securitizations, franchise loans, private Credit, crypto Credit, DeFi, and on and on. A massive infrastructure has evolved over this long cycle to spur consumption for tens of millions, while financing thousands of uneconomic businesses.
The Federal Government will now find its interest cost of carrying a record $30 trillion in Federal debt far more costly. Unlike the 1930s Great Depression when Federal debt was near nothing, today the Government, especially since the Biden budget measures, is at the limits. The US is becoming a Third World economy. If the Fed no longer buys trillions of US debt, who will? China? Japan? Not likely.
Deleveraging the Bubble
With the Fed now imposing a Quantitative Tightening, withdrawing tens of billions in bonds and other assets monthly, as well as raising key interest rates, financial markets have begun a deleveraging. It will likely be jerky, as key players like BlackRock and Fidelity seek to control the meltdown for their purposes. But the direction is clear.
By late last year investors had borrowed almost $1 trillion in margin debt to buy stocks. That was in a rising market. Now the opposite holds, and margin borrowers are forced to give more collateral or sell their stocks to avoid default. That feeds the coming meltdown. With collapse of both stocks and bonds in coming months, there goes the private retirement savings of tens of millions of Americans in programs like 401-k. Credit card auto loans and other consumer debt in the USA has ballooned in the past decade to a record $4.3 trillion at end of 2021. Now interest rates on that debt, especially credit card, will jump from an already high 16%. Defaults on those credit loans will skyrocket.
Outside the US what we will see now, as the Swiss National Bank, Bank of England and even ECB are forced to follow the Fed raising rates, is the global snowballing of defaults, bankruptcies, amid a soaring inflation which the central bank interest rates have no power to control. About 27% of global nonfinancial corporate debt is held by Chinese companies, estimated at $23 trillion. Another $32 trillion corporate debt is held by US and EU companies. Now China is in a covid-induced economic crisis and will take time to recover. One helpful boost to the economy is the huge discounts on energy imports from Russia, Iran, Iraq and Venezuela. With the USA, China’s largest customer, going into an economic depression, China’s crisis can only worsen. That will not be good for the world economy.
Italy, with a national debt of $3.2 trillion, has a debt-to-GDP of 150%. Only ECB negative interest rates have kept that from exploding in a new banking crisis. Now that explosion is pre-programmed despite soothing words from Lagarde of the ECB. Japan, with a 260% debt level is the worst of all industrial nations, and is in a trap of zero rates with more than $7.5 trillion public debt. The yen is now falling seriously, and destabilizing all of Asia.
The heart of the world financial system, contrary to popular belief, is not stock markets. It is bond markets—government, corporate and agency bonds. This bond market has been losing value as inflation has soared and interest rates have risen since 2021 in the USA and EU. Globally this comprises some $250 trillion in asset value a sum that, with every fed interest rise, loses more value. The last time we had such a major reverse in bond values was forty years ago in the Paul Volcker era with 20% interest rates to “squeeze out inflation.”
As bond prices fall, the value of bank capital falls. The most exposed to such a loss of value are major French banks along with Deutsche Bank in the EU, and with the largest Japanese banks. US banks like JP MorganChase are believed to be only slightly less exposed to a major bond crash. Much of their risk is hidden in off-balance sheet items, such as derivatives and such. However, unlike in 2008, today central banks can’t rerun another decade of zero interest rates and QE. This time, as insiders like ex-Bank of England head Mark Carney noted three years ago, the crisis will be used to force the world to accept a new Central Bank Digital Currency, a world where all money will be centrally issued and controlled. This is also what Davos WEF people mean by their Great Reset. It will not be good. A Global Planned Financial Tsunami Has Just Begun.
The strange thing in all this was that the 2 families thought that their Ukraine Project would be success. Had this been a success, the next geopolitical targets would have been Iran and China. And while this was going on, the next phase of their plan was to implement the CBDC –the central banks digital currency. But, the Ukraine Project turned into a complete failure.
This failure has led to panic within the 2 families. This panic, in turn, is being felt by all its key vassals in the political, business and financial class. This panic is being seen by the world, when such leaders make moronic statements and threats. When they see the positive outcomes of meetings between the leaders of the Global South, or Zone B, they are reduced to snarling, whining, scandals, and so on. The spectacle of these figures of the Collective West, or Zone A, is a sight to see. The 2 families would rather see the world blown up than losing their empires. The problem lies in the coming weeks and months. There will come a point in time when the Rockefeller Empire MAY exercise the nuclear option. And that will bring about a whole new set of problems.
But just to look at the United States economy: Industrial production and manufacturing output were both lower than they had been a year earlier the “manufacturing index” thus far in March indicate still deeper contraction underway. In the IT or “tech” sector—some 150,000 layoffs have been carried out/announced just since Nov. 1, with more to follow. The reason the U.S. FDIC (Federal Deposit Insurance Corporation) “bailed out” depositors of these failed banks (by reimbursing both insured and uninsured deposits), was that no big bank was willing to buy it.
The unwillingness of any major bank to absorb SVB highlighted what Reuters, in an article March 14, called increased “interbank market stress”—the unwillingness of large banks to lend to each other as a financial crisis develops.
This interbank breakdown appeared in September 2019, triggering the unbelievable mass of Federal Reserve liquidity interventions and money printing for the big banks in the two-and-a-half years that followed; and it has appeared again. It is a sign of how serious the developing financial crisis is.
In Europe there is Credit Suisse, a “major” bank so drowned in failed speculations that Credit Suisse has been a ICU patient for two years without managing to die. Now it is finally failing and, was taken over by the Swiss banking giant UBS, in order to avoid spreading serious “contagion,” through its derivatives exposure, to big banks in Paris, London, Frankfurt and on Wall Street. Both Credit Suisse and UBS are in the Rothschild orbit.
This is a de facto bailout of the banking system. It has eliminated productivity growth: Without higher productivity through introduction of more energy-dense technologies into infrastructure and industry, neither inflation nor deepening recession can be combated.
Rising Interest Rates
Today, interest rates are rising—which is normally a good thing for banks—and yet banks are failing- It’s worth remembering now that 85% of all derivatives bets are on interest rates. If inflation becomes a problem, banks will want higher interest rates to try to offset the adverse impact of inflation on buying power. These higher interest rates will tend to reduce demand for goods that are often bought with debt, such as homes, cars, and new factories. As a result, the sale prices of these assets are likely to fall. Higher interest rates will tend to produce the same effect for many types of assets, including stocks and bonds. To make matters worse, defaults on loans may also rise, leading to write-offs for the organizations carrying these loans on their balance sheets. An even more serious problem with higher interest rates is the harm they do to the balance sheets of banks, insurance companies, and pension funds.
Huge pressure is building now for China and Russia to trade in their own currencies, rather than the US dollar, putting pressure on the US financial system and its status as the reserve currency. It is also not clear whether the US would be able to fight on more than one front in a conventional war. A conflict with Iran has been mentioned as a possibility, as has a conflict with China over Taiwan. It is not at all clear that a conflict between NATO and China-Russia is winnable by the NATO forces, including the US.
The US military has fallen behind Russia in technological advances. The West has underestimated Russia’s economic and military potential. While Russia has deployed and fired several different types of hypersonic missiles, the US failed in its 5th attempt to launch a successful test of a hypersonic missile. In addition, Russian air defense systems are world class. The production capability of Russia’s military industrial is GREATER THAN THE COMBINED capacity of NATO! In some cases, by a factor of 10. This is not even taking equipment losses of Ukraine on the battlefield. Russia destroyed around 8,500 Ukraine’s tanks and armored vehicles in 13 months of war. These are just some of the litany of problems haunting the Pentagon. In a recent speech, a US top general warned that it would be “very difficult” for Washington to face Russia and China at the same time.
On March 29, General Mark Milley, head of the Joint Chiefs of Staff of the US Army, stated that, despite the high combat capability of the US military, the country would have serious problems if it really had to deal with a serious conflict against Beijing and Moscow.
“Our military, capability-wise, can fight in a lot of places with different types of contingencies, but if you’re talking about a serious conflict with a major great power war, realistically, putting both China and Russia together is a very, very difficult thing”, he said.
“I’m concerned… about… any coherence and cohesion between Russia and China… And then if you add in Iran as the third. So those three countries together are going to be problematic for many years to come, I think, especially Russia and China because of their capability”, he added.
Milley, however, emphasizes that, despite the military difficulties in a scenario of direct confrontation, he relies on American nuclear power to neutralize a large part of US opponents – mainly China, which despite the extraordinary recent military development still has a smaller nuclear deterrent power compared to US and Russia: “From a nuclear deterrent posture – we are very secure because we have an exceptional nuclear system (…) We can guarantee it without question”, he said, and that – – “We are left with a major problem: Our current complex economy is in danger of degrading remarkably in the next few years, but we have no replacement available. Even before then, we may need to do battle, in new ways, with other countries for the limited resources that are available.”
The US military went from a superb fighting machine to a train wreck in the space of 2 decades. The wars in Afghanistan and Iraq cost trillions in treasure, but it also helped to break the back of the American military. These adventures managed to take the R & D section of the military to “sleep” in so far as upgrading military technologies. Other nations stole their thunder. As a result, both Russia and China have overtaken the Pentagon in terms advancement in military technologies. US military power has declined in terms of manpower, equipment and technology advances. Let us take the example of the US Navy: 30 years ago, a US battle carrier group could be taken down by 3 Russian subs. Today, it would take only 1 Russian sub. It is an economy of warfare. It means that Russian technological advantage has taken over the US. 15 years ago, The US homeland was immune to a missile attack from its adversaries. Today, Russian subs can station themselves around several hundred kilometers off-shore. Advanced missiles and torpedoes can hit the US mainland within 5-10 mins of launch. Besides, Russia has the ability to target high-value targets with precision hypersonic missiles. In so far as China is concerned, the Chinese Navy has a larger fleet than the US, although they still lack a competent submarine force.
Recently, Brazil allowed two Iranian warships to dock in Rio, despite Washington’s pressure. Iranian oil tankers in fact have also been crossing the Caribbean Sea and entering Venezuela’s waters undisturbed for a while – largely thanks to Chinese backing. Beijing’s rising presence in the Caribbean in turn is just another sign of declining American sea supremacy. Not only is a new multipolar world is emerging, but also a multipolar sea. The age of American naval dominance as a sea power is coming to an end.
The original aim of the 2 families was to induce Russia to attack Ukraine. Then use this act to sanction and cripple Russia’s economy. The ensuing months witnessed these sanctions having a blow-back effect on the Western economies and financial systems. A classic case of the “hunter becoming the hunted”.
Here, we will briefly explain what all this mean in terms of economic and financial consequences for you as an individual, as a business owner. What about the governments and its related entities, such as municipalities, etc.? It would be best to do a regional analyses, for the EU, America, and the Global South.
The EU
The EU is in the Rothschild orbit. As one has witnessed over the past year, Britain and France have been the most vocal in pushing an anti-Russian narrative, and have followed this with action. This war has hurt EU more than any other region.
Increasing energy and food shortages have led to very high prices. In addition, interest rates have increased by nearly 1000%, from 0.5 % to nearly 5% over the past year. In addition, the EU has become de-militarized and soon will become de-industrialized. This has led to rising social protests across the entire EU. The EU citizens have seen their lives shattered because the EU governments are doubling down on the losing Ukraine Project. At the current rate, the dysfunctional EU system will break up.
In banking, Credit Suisse was the first to collapse. Next is Germany’s Deutsche Bank.
The collapse of the financial system is looking imminent with Credit Suisse the first domino; it will trigger a process that would lead to the collapse of multiple banks.
“Yes, the Credit Suisse matter is very serious, think how many accounts are linked to every known elite criminal in the world,” a CIA source chimes in. “Suisse most likely will be the first major Rothschild controlled bank to be let go. This smells like end game,” a Mossad source says.
The head of MI6 agrees saying: “Credit Suisse is indeed implicated in international criminal fraud, in this case, the money laundry in Geneva of The EU, paying bribery to all of the Presidents and Prime Ministers to commit high treason. We have all the evidence.”
Since all the Rothschild’s European banking network are inter-locked through common ownership, through counterparty risks, etc. Thus, when one of these banks are in trouble, it may drag down the other banks in this network.
“I know from very credible sources that Bank of America, Wells Fargo and JP Morgan Chase are insolvent and have bankruptcy proceedings active. They are ‘sealed’ from the public’s view,” the Mossad source adds.
Bail Out the Banks, Kill the People
That is pretty much the operative slogan for what has happened in world financial markets over the last 20 days.
The City of London and Wall Street vultures have received, or have been promised, over $700 billion in bailouts, beginning with the Silicon Valley Bank blowout on March 10 and up through Sunday night’s announcement on March 19 that the Swiss National Bank (SNB) would be ponying up another $216 billion, on top of an earlier $54 billion, to prevent Credit Suisse from bringing down the entire trans-Atlantic financial system on Monday morning. So that’s a cool $270 billion—so far—to prevent a systemically risky bank from going under.
The SNB had the Fed, the Bank of England and the ECB breathing down their neck over the weekend to do the deed. The Fed itself has committed to bailing out all the depositors at Silicon Valley Bank (they held $175 billion in deposits at the end of 2022), Signature Bank ($89 billion), and Silvergate Bank ($14 billion), which potentially adds another $278 billion to the tab. And then there’s First Republic Bank, which, despite the $30 billion in bailout cash from 11 large U.S. banks that the Treasury demanded they provide, is still hanging by a thread. And its total deposits, which the Treasury is considering “making whole,” in complete violation of the law and the FDIC’s authority, could add another $176 billion at any moment.
So any way you look at it, we are already looking at a bailout that is in the range of $720 billion … and counting. The Swiss bailout is $720 billion. The US bailout is $720 billion. Add it up, it totals $1.440 TRILLION. All of this in JUST 10 DAYS!!! Such numbers aside, how much time do these emergency actions buy, before the fuse sets off the $2 quadrillion financial derivatives bomb? Tick, tick, tick…
The bail-out during the last 19 days of $1.440 trillion translates to more than the entire yearly GDP of the 30 poorest countries in the world. It is well over three times the annual government budgets of Nigeria ($40 billion), Indonesia ($110 billion) and Argentina ($70 billion)—three countries that have applied to join the BRICS-Plus grouping in order to break with the genocidal consequences of exactly the policies that the City of London and Wall Street have been carrying out over the last 10 days.
How many countries could be pulled out of poverty with $1.440 trillion? Don’t bother asking the 2 families. They don’t care.
There is now a flight to “cash,” to a safe haven – something even better than cash: U.S. Treasury securities. So far, the stock market has resisted following the plunge in bond prices. My guess is that we will now see the Great Unwinding of the great Fictitious Capital boom of 2008-2015. The Arabs are on the verge of pulling their money out of Swiss and EU banks. So the chickens are coming home to roost – with the “chickens” being, perhaps, the elephantine overhang of derivatives. The story continues with the next article, called “Rising Rates = Financial Implosion”
