Issues contributed:
Europe is experiencing a rapid increase, a “Flood”, of corporate bankruptcies, which are likely to pickup pace shortly.
U.S. consumer is in her ‘last innings’, and a credit crunch is about to hit the U.S. economy.
Under the surface, economic collapse is gathering steam.
On November 23, I published an ominous Tweet in X (Twitter), warning to expect a global collapse “of everything” within the next four months. In mid-March we almost got there with the banking panics in the U.S and Switzerland, which were quickly quelled by the (rather draconian) measures of the authorities. While this somewhat exempted me, banking panics were actually just my secondary concern, when I published the warning.
My warning concerned primarily the situation in Europe, which was darkening fast due to accelerating inflation, rapidly rising interest rates and massive spike in energy prices. Cutting off most of Russian gas and dwindling electricity production threatened to push our continent into rolling blackouts or even into an “energy-shutdown”. Fortunately, Europe experienced one of the mildest winters on record, sparing us from that fate. The rapid response of European authorities to secure alternative supplies of natural gas, naturally, also helped.
However, while we were spared from the energy-shutdown, under the surface, the collapse still started. This was something we simply could not avoid. Country-related macroeconomics imbalances magnified by the European common currency (euro), ultra-low interest rates and asset-purchase programs (money printing) by the European Central Bank (ECB) had zombified the European economy. This meant that many European corporations and even some governments (not to mention banks) were able to continue operating only with the help of massive monetary and fiscal support. Yet, the combination of energy, inflation and interest rate shocks simply could not pass the (zombified) European economy without serious repercussions. So, the collapse of the European economy started, but because the energy-shock eased, it morphed into a stealth collapse, and now the Israel-Palestine conflict has the capacity to turn it to overdrive.
The same applies to the U.S. You simply cannot keep interest rates to near zero for a decade and push trillions of dollars into the economy without making it fragile. Corona lockdowns and stimulus checks effectively turned the U.S. economy into a ‘powder keg’ with the Federal Reserve lighting the fuse with its most rapid interesting hiking cycle in the history of the central bank. As a result, the financial system nearly unraveled in late-March stopped only by the very exceptional (draconian) measures of U.S. authorities. However, like I been warning, these measures just pushed the crisis back under the surface from where it will, most likely, re-emerge with a renewed fervor. The massive amount of money pushed into the economy during the Corona times has led to an illusion that the U.S. economy would be resilient, while it’s simply eating itself from inside out. Alas, the collapse of the U.S. economy has also already started, but on “stealth mode”.
Let me now explain these in more detail.
A silent run on corporations
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