Congressional Budget Office warns U.S. debt will soon become unsustainable

Debt US
August 2015WASHINGTON The economy is sluggish but growing and inflation remains low, painting a decidedly mixed picture for the federal government, the Congressional Budget Office reported Tuesday, saying the fiscal situation is improving this year but will snap back by 2018 to swelling deficits and unsustainable debt. The inflation rate is so low that Social Security beneficiaries probably won’t get a cost-of-living raise after this year, the CBO said. But tax revenue is up and spending has stayed pat, which is helping reduce the pool of red ink in the federal budget.
Combined, those numbers mean the government will run a deficit of $426 billion in fiscal year 2015, down about $60 billion from 2014 and marking the smallest deficit of President Obama’s tenure. The good news will continue for a couple of years as the economy belatedly but fully rebounds from the recession of December 2007 to June 2009. By 2018, though, debt will rise as government spending grows and the economy will cool again, the CBO said.
“The growth in debt is not sustainable,” CBO Director Keith Hall said in presenting the estimates. “At some point, it’s going to get to a very high level. Obviously, you can’t predict tipping points, but at some point this becomes a problem.” Democrats saw the short-term outlook as progress and said it’s time to close tax breaks and bring in more revenue for spending on investments such as infrastructure. Republicans kept their focus on the longer-term warnings in the CBO report. They noted that taxes will remain higher than their historic average over the past five decades but deficits will persist because spending will still outpace revenue.
Budget watchdogs pleaded with all sides to go beyond the numbers and talk about solutions to persistent debt. “I don’t know how anyone can declare victory when trillion-dollar deficits are just on the horizon,” said Judd Gregg, a former senator and a co-chairman of the advocacy group Fix the Debt. “While deficits are down this year, the real story is that they are on the rise and that our national debt is at record-high levels and growing.” Watchdogs pleaded with presidential candidates to start talking about the national debt in their campaigns. For the most part, that conversation has been muted. Democrats have called for tax hikes to pay for more spending, and Republicans generally have focused on other issues. –Washington Post
Posted in Age of Decadence, Austerity, Bank Run, Banking Crisis, Bankruptcy, Boom and Bust Cycles, Depression and Anxiety, Economic Collapse, Economic Hardship or Loss, Fiat Money Printing Fiasco, Financial Market plunge, Financial market turmoil, Flashpoint for war, Geopolitical Crisis, Greed and Corruption, Hierarchal Control, Infrastructure collapse, New World Order, Social Meltdown, Squandered Resources, The Pyramid Model, Troubled Banks, Unemployment rising, Unsustainable Debt Burden | Leave a comment

U.S. stocks stage dramatic reversal, erasing rally and raising new fears

Stock Market Peak
August 2015 FINANCIAL U.S. stocks plunged in the last hour of trading Tuesday to wipe out a day-long rally, adding fresh uncertainty to markets that had seemed to be on the rebound. The wild swing highlighted investors’ anxieties over an expansive Chinese slowdown and hinted at fault lines in a U.S. economy otherwise seen as strong. The surprising setback dropped the Dow Jones industrial average more than 650 points from its midday peak, its biggest reversal since 2008, and pushed the index of 30 blue-chip stocks down 204 points, or about 1 percent, to 15,666.44.
Investors had spent most of the day climbing back from a dismal Monday and from several days of carnage in Chinese stock markets. China’s central bank on Tuesday cut interest rates in a bid to stimulate the country’s economy, and for a while, that appeared to reassure European and U.S. markets. But by late afternoon, Wall Street went back into selling mode, as lingering fears about a slowdown in the global economy undercut the brief surge of confidence. “We all looked at each other and said, ‘Huh?’ If you didn’t look in the last 30 minutes, you missed it,” said Meg Green, the chief executive of Meg Green & Associates, a Miami wealth-management firm that handles more than $750 million in assets.
Wile EShe guessed that the late turnaround came from either pre-programmed trading or “a lot of people who looked at the markets and said, ‘You know what? I’m going to take my bounce profits and go home.’ ” The selloff extended a six-day losing streak and suggested more turmoil to come. “Volatility will remain elevated here in the coming weeks,” said Adam Burch, a market investment director for U.S. Trust. “People have become emotionally engaged and aren’t looking objectively at the market.” Both the Standard & Poor’s 500-stock index, a broader sample of the market, and the Nasdaq composite, an index dense with tech stocks, slid about 1 percent. All Dow stocks pocketed solid gains in the morning, but the index ended the day at an 18-month low. The earlier rally had been fueled not only by interest-rate cuts in China, but also by promising news at home, including new data that showed boosts in new-home sales and improving consumer confidence. But the depth of China’s troubles weighed on U.S. traders. In China on Tuesday, authorities appeared powerless to prevent a further slide in the country’s ailing market, as China’s main share index plunged for a fourth day in a row.
The main Shanghai share index opened Tuesday more than 6 percent lower and reached an eight-month low. A slight recovery was not sustained, and it ended 7.6 percent down. “At the moment, there’s panic in the market because we have lots of retail investors,” said Wei Wei, an analyst at Huaxi Securities in Shanghai. “We’ve never experienced anything like this in China’s stock market, the speed of the decline and the scale of it.” –Washington Post
Posted in Austerity, Bank Run, Banking Crisis, Bankruptcy, Boom and Bust Cycles, Civil Unrest, Currency - Economic warfare, Economic Collapse, Economic Hardship or Loss, Fiat Money Printing Fiasco, Financial Market plunge, Financial market turmoil, Geopolitical Crisis, Hoarding Gold, Hoarding Resources, Infrastructure collapse, Protests, Resource War, Social Meltdown, Troubled Banks, Unsustainable Debt Burden, Widening gap between rich and poor | 1 Comment

German Media: European refugee crisis is the result of U.S. Economic Wars

Europe Migrant Crisis
August 2015 GERMANYIn order to resolve the current refugee crisis, European governments should reconsider their foreign policy and force allies of the United States to end global economic wars. The war should be prevented by those who instigate it, otherwise the world will face dark times in the future, DWN wrote. Europe seems to be powerless with regard to the huge “refugee waves” from around the world. Angela Merkel acts as though she was completely taken by surprise, and so do other EU politicians helplessly watching the aggravating tendency, the newspaper wrote.
The lives of refugees are unenviable. Far-right groups view them as “parasites seeking to cling to the hard-won prosperity of Europeans.” Charity organizations can barely cope with the increasing inflows and secure more or less appropriate living conditions for them. According to DWN, the main reason for the current refugee crisis is economic war, initiated by a number of countries to enforce their economic and geopolitical interests. People become refugees when their homelands are devastated by the war, and usually there are superpowers involved in the “dirty game” of gaining profit. Those countries which position themselves as the guardians of democratic values and human rights often benefit from military conflicts more than anyone else, the newspaper wrote.
“Libya was stable until the West led by the US overthrew Gaddafi and plunged the country into chaos. Iraq was stable until George W. Bush declared it an evil empire. Syria was stable until Obama said Assad was a mass murderer,” the article said. The refugee crisis will continue as long as the Western public accepts the fact that global foreign policy is no longer made by responsible politicians, but by intelligence services and economic lobbies. Moreover, Europeans should reconsider their foreign policy and force Americans and their allies to stop global destruction, which arises from their geopolitical aspirations. If Europe continues its passive strategy, it will soon experience the next disaster. If the situation in Europe escalates, European countries will again have to host millions of people seeking to escape another war, DWN wrote. –MINA
Posted in Age of Decadence, Arms Race, Austerity, Boom and Bust Cycles, Conflict Among Nations, Economic Collapse, Escalating hostilities, Ethnic tensions, Flashpoint for war, Geopolitical Crisis, Greed and Corruption, Hierarchal Control, Immigration surge, Infrastructure collapse, Political turmoil, Protests, Religious War, Social Meltdown, Squandered Resources, The Pyramid Model | Leave a comment

The Exodus: thousands flee Puerto Rico for U.S., as island teeters closer to economic collapse

Puerto Rico Exodus
August 2015 PUERTO RICO“It’s a lot of people coming now,” Kissimmee Commissioner Art Otero said. “And it’s not just anybody. Even professionals are moving here — doctors, teachers, specialists. The schools are expecting hundreds of new kids assigned to the district.” The number of Puerto Ricans in the 50 U.S. states and the District of Columbia — more than 5 million, according to Census data — significantly outnumbers the 3.5 million on the island. With those numbers rising, fueled by the latest exodus, here is how the three U.S. cities with the largest populations of Puerto Ricans — Orlando, New York and Chicago — are dealing with the influx during the economic crisis:
Perhaps nobody captures the situation in central Florida better than Carlos Merced, an actor in Puerto Rico who moved to this region eight years ago. “Puerto Ricans land at the Orlando airport and think they’re going to be greeted by Mickey Mouse, who will scoop them up in his arms, take them to Cinderella’s castle, and the princesses will fix everything for them,” he said. “But the problem is, those princesses aren’t Hispanic, and Mickey doesn’t speak Spanish.” Even before the island’s economy tanked, islanders were flocking to the Orlando area, now home to more than 370,000 Puerto Ricans. The growth happened so rapidly that the Osceola County school district has added portable classrooms, built new wings to existing schools and has two new high schools set to start construction soon, school board member Kelvin Soto said.
Officials say migration has spiked in recent months as the government began defaulting on its loans. Betsy Franceschini, director of the Puerto Rico Federal Affairs Administration’s office in nearby Kissimmee, Fla., said families show up at her office with suitcases looking for help. She estimates about 1,000 families a month are moving to the area. Too many are coming unprepared. A string of motels built along Kissimmee’s main street for people visiting Disney World are now filled with Puerto Ricans who can’t afford to rent an apartment. Janira Torres, who owns the popular Melao Bakery in Kissimmee, said Puerto Ricans are so desperate for work that she has boxes of applications.
When she visited family back on the island recently, people in her neighborhood begged her to interview them for potential jobs. Orlando City Commissioner Tony Ortiz said many Puerto Ricans eventually succeed in the area. But as the rush increases, he fears even more won’t make it. “I’m not scared, because I know we will benefit from the talent that a lot of them bring,” he said. “But I’ve seen so many people return to Puerto Rico in a more desperate situation than what they left. It gives me a huge pain in my heart.” –USA Today
Posted in Age of Decadence, Anger, Apathy, Anger, Mistrust, Disillusionment, Austerity, Bank Run, Bankruptcy, Boom and Bust Cycles, Civil Unrest, Economic Collapse, Financial Market plunge, Financial market turmoil, Greed and Corruption, Immigration surge, Infrastructure collapse, Political Corruption, Political turmoil, Social Meltdown, Squandered Resources, Unsustainable Debt Burden | Leave a comment

As civil war, ethnic strife, and economic downturns ravage countries – illegal immigration surges out of control

Europe Immigration
August 2015BUDAPEST, Hungary The latest surge of migrants crossing the Balkans has brought a record number to Hungary despite government efforts to quickly build a 4-meter (13-foot) high fence on the Serbian border to stop them. According to police data, 2,093 migrants were detained Monday, the highest figure so far this year. Over the past week, the daily average was of 1,493 migrants.
Government spokesman Zoltan Kovacs said Tuesday that “unsustainable conditions” would develop in Budapest and other large European cities unless concerted efforts were made to establish “some kind or order or regularity” regarding the flow of migrants. About 140,000 migrants have reached Hungary this year, over three times as many as in all of 2014, but most quickly leave for richer European Union countries like Germany or the Netherlands. – NY Times
Illegal Im Europe
South America: Venezuela has deported hundreds of Colombians as part of a security offensive along the border that is causing tensions between the two neighboring countries. More than one thousand Colombians who had been living in Venezuela illegally were handed over to Colombian authorities, according to Gov. Jose Gregorio Vielma Mora of Tachira state. Venezuela says this is a crackdown against smugglers and criminal gangs operating along the border.
Last week Venezuelan President Nicolas Maduro closed a major crossing and declared a state of emergency in several western cities after three army officers were shot and wounded by gunmen he said belonged to paramilitary gangs operating from Colombia. The gunmen have not been caught or identified, but the incident touched a nerve with supporters of Maduro’s administration, who increasingly have placed blame for rampant crime and widespread shortages on Colombians.
Venezuela has added about 1,500 extra troops to the border area to do house by house searches looking for smugglers who buy goods at low prices in Venezuela and resell them across the border for big profits. Former Venezuelan ambassador and current Colombian Foreign Minister Maria Angela Holguin, went to the border Monday to supervise humanitarian efforts amid reports from deportees that families had been broken up and their homes bulldozed as part of the dragnet. “We’re convinced that closing the border isn’t how we fight contraband,” Holguin said. Vielma Mora, the Venezuelan governor, denied reports of abuses, which The Associated Press was unable to verify. He said all those deported were treated with respect.
A Colombian official who spoke on condition of anonymity said the situation was tense but there was little to suggest that Venezuela had violated international conventions in its treatment of detainees. Colombian President Juan Manuel Santos said Maduro’s action would hurt communities on both sides of the border and generate unease. An estimated 5 million Colombians live in Venezuela, many of them without permission, and the flow of people and goods across the border has been a fixture of daily life for decades, changing direction with the shifting fortunes of each nation’s economy.   –NBC News

UK passes tough new draconian laws to imprison illegal immigrants

Illegal immigrants will face six months in jail if they come to work in the UK and late-night takeaways and taxi firms will be closed if they employ them, ministers will announce. Ahead of net migration figures on Thursday that are expected to show a record number of foreigners are coming to the UK, the Government will unveil its latest crackdown on illegal foreign workers. As part of the plans drawn up in the wake of the Calais immigration crisis, the Government will create a new offence of illegal working which will come with a prison sentence of up to six months as well as an unlimited fine.
The authorities will also be able to seize wages as “proceeds of crime.” It means that instead of being taken to detention centers, illegal migrants will be processed through the courts before being taken to jail. Ministers believe it will act as a deterrent and prevent thousands of migrants attempting to gain access to the UK from European ports including Calais. Mr. Brokenshire said: “Anyone who thinks the UK is a soft touch should be in no doubt – if you are here illegally, we will take action to stop you from working, renting a flat, opening a bank account or driving a car.” He added: “Through our new Immigration Bill, illegal workers will face the prospect of a prison term and rogue employers could have their businesses closed, have their licenses removed, or face prosecution if they continue to flout the law.” –Telegraph

Posted in Age of Decadence, Apathy, Anger, Mistrust, Disillusionment, Currency - Economic warfare, Depression and Anxiety, Economic Collapse, Economic Hardship or Loss, Escalating hostilities, Ethnic tensions, Financial Market plunge, Financial market turmoil, Geopolitical Crisis, Greed and Corruption, Hierarchal Control, Immigration surge, New World Order, Political Corruption, Political turmoil, Protests, Resource War, Social Crime, Social Meltdown, Squandered Resources, Struggle for Survival, The Pyramid Model | Leave a comment

Ashley Madison hack might have led to suicides; reward set for info on breach

Ashley Madison
August 2015TECH CRIMES Toronto Police are investigating a hack into the adultery website, Ashley Madison. Toronto Police acting staff-Supt. Bryce Evans said the hack is having enormous social and economic fallout. “This hack is one of the largest data breaches in the world,” Evans said. “This is affecting all of us. The social impact behind this leak, we’re talking about families, we’re talking about children, we’re talking about wives, their male partners.” The hackers who took responsibility for the break-in had accused the website’s owners of deceit and incompetence, and said the company refused to bow to their demands to close the site. The hackers referred to themselves as the Impact Team. Evans said the hackers released the entire Ashley Madison client list, which claims more than 30 million users worldwide. He said the hackers also sent a taunting message to the company CEO and released his emails.
The police official did not offer further details of the unconfirmed suicides. He also said hate crimes may be connected to the hack but did not provide details. Evans addressed the hackers directly, saying their actions are “illegal and will not be tolerated. This is your wake-up call,” he said. A representative of the U.S. Department of Homeland Security attended the news conference. Special Agent Ron Marcello of Homeland Security Investigations said Toronto police asked for assistance and said the FBI is the lead on investigating the hack. U.S. government employees with sensitive jobs in national security or law enforcement were among hundreds of federal workers found to be using government networks to access and pay membership fees to Ashley Madison, The Associated Press reported last week. “This is worldwide,” Evans said. “We’re looking at bringing in top security investigators from around the world to assist.” –Big Story

Posted in Age of Decadence, Apathy, Anger, Mistrust, Disillusionment, Cyber crime, Depression and Anxiety, Disillusionment, Greed and Corruption, Hierarchal Control, Mistrust, Social Crime, Social Meltdown, Squandered Resources, Surveillance - Police State, Tech Crimes, The Pyramid Model | 3 Comments

Stock up on canned food for stock market crash, warns former Gordon Brown adviser – ‘what’s coming is 20 times worst than 2008’

Can goods
August 2015 FINANCIALA former adviser to Gordon Brown has urged people to stock up on canned goods and bottled water as stock markets around the world slide. Damian McBride appeared to suggest that the stock market dip could lead to civil disorder or other situations where it would be unreasonable for someone to leave the house. “Advice on the looming crash, No.1: get hard cash in a safe place now; don’t assume banks & cash points will be open, or bank cards will work,” he tweeted. “Crash advice No.2: do you have enough bottled water, tinned goods & other essentials at home to live a month indoors? If not, get shopping.
“Crash advice No.3: agree a rally point with your loved ones in case transport and communication gets cut off; somewhere you can all head to.” Mr. McBride credited his former boss Gordon Brown with preventing a cataclysm by nationalizing the banking system during the 2008 crash. “We were close enough in 2008 (if the bank bailout hadn’t worked),” he said. “And what’s coming is on 20 times that scale.” Financial markets are unstable and periodically suffer crises which can have devastating consequences for the wider economy.
Index, China’s most important stock market index, was down 8.45 per cent, erasing a year’s gains in a day’s trading. The FTSE100 fell 4.5 per cent, hoping £60bn off the price of UK shares, and the Dow Jones in the US fell by over a thousand points in its first minute of trading. Some analysts have suggested that the stock market slide could be the start of a new global financial crisis. Mr McBride’s suggestions about stocking up on canned goods, setting rally points and stocking up on bottled water were ridiculed by some users on Twitter as over the top, however. Mr McBride was special adviser to Gordon Brown and head of communications at the Treasury for a period during the last Labour government. –Independent

Dow plunges more than 1,000 point in early trading

Blood on Wall Street BStocks plunged Monday as the market downturn showed no signs of letting up with the Dow tumbling as much as 1,089 points in the opening minutes of trading. Sharp early losses were pared in later morning trading but stocks were still down substantially. The Standard & Poor’s 500 index plunged as much as 100 points as it dipped into correction territory before cutting its losses to about 50 points, or a drop of 2.5%. The Dow was down about 350 points, or 2.1% and the Nasdaq composite index dropped 100 points, or 2.1% after being down as much as 5% earlier. Market anxiety is on the rise after a big sell-off in China overnight, where the Shanghai composite index shed 8.5%, its biggest one-day decline since 2007 — and Chinese media were dubbing the selloff “Black Monday.” The global stock rout then moved to Europe where major indexes there are off roughly 5%.
“Bad break,” is the way Edward Yardeni, chief investment strategist at Yardeni Research, described the global tumult in stock markets around the globe. “It’s a really cruel summer,” Savita Subramanian, equity and quant strategist at Bank of America Merrill Lynch told clients in a report before the opening bell. “Call it derisking, a flight to quality, a momentum meltdown, or the first signs of a global recession,” but the fact is the past week saw the first pullback of greater than 5% since last October and the worst week since September 2011, she added. –USA Today
Posted in Age of Decadence, Apathy, Anger, Mistrust, Disillusionment, Austerity, Bank Run, Banking Crisis, Bankruptcy, Boom and Bust Cycles, Currency - Economic warfare, Economic Collapse, Economic Hardship or Loss, Fiat Money Printing Fiasco, Financial Market plunge, Financial market turmoil, Geopolitical Crisis, Greed and Corruption, Hoarding Resources, Infrastructure collapse, Political Corruption, Political turmoil, Resource War, Squandered Resources, Struggle for Survival, Troubled Banks, Unemployment rising, Unsustainable Debt Burden, Widening gap between rich and poor | 5 Comments

China’s stock market loses 8.4 percent in hours – This may be the start of the world’s next financial crisis

China Market Crash
August 2015BEIJING Asian stock markets took a battering in the first hours of Monday trading, exacerbating last week’s worldwide stock sell-off over fears that China’s sluggish economy may only get worse. From here, the news only gets worse.
China’s principal stock market, the Shanghai Composite, lost 8.4 percent of its value in just a couple of hours and, according to CNN, some of China’s biggest companies, private- and state-owned, took the maximum allowed 10 percent daily loss within an hour. That’s on top of a loss of 11.5 percent last week. The smaller Shenzhen Composite also lost nearly 8 percent Monday morning. –Washington Post
Shanghai Composite
China’s stock markets continued a seemingly uncontrolled drop on Monday, pulling everything from Asia stock exchanges to commodities down further with them. Despite a huge amount of government stimulus, investors have lost faith in China’s stocks and are now focused on an impossible to answer question: how bad will China’s economic slowdown be? The Shanghai Stock Exchange had fallen 8.8% by early afternoon on Monday, breaking through the 3,500 level at which the government has been supporting the market.

Taiwan Index

Concerns about China’s economic future and falling demand is also causing commodity prices to collapse. The price of Brent crude fell below the $45 mark on Monday for the first time since March of 2009:

Brent Crude Oil

The situation, particularly as the US Federal Reserve is expected to begin a monetary tightening phase, is evoking comparisons to the 1997 Asian financial crisis and the 2008 crisis sparked by the U.S. subprime lending. There’s also a growing sense that these market drops are going to be impossible to control.
Yes, as Bloomberg points out, Asian economies are in a healthier spot now than they were in 1997, but interest rates in many countries around the world are already near historic lows, so there’s little wiggle room for the world’s central banks to intervene to try to boost local economies and turn these downturns around. –Quartz
Yuan Meltdown
Having seen the nation’s benchmark Shanghai Composite stock index get slammed by 4.21% on Friday, taking its weekly loss to 11.54%, Chinese authorities wheeled out their latest attempt to underpin shaky investor confidence over the weekend, announcing that China’s giant pension fund will be able to increase its allocation in domestic shares to as much as 30%. The decision, given approval by China’s state council on Sunday, could see the fund allocate as much as 1.05 trillion yuan ($164.345 billion) according to a report in the South China Morning Post.
While another huge injection of potential capital, something that may help reduce the pressure on stocks short term, whether it can help address the market slide beyond that remains a highly debatable question at present. All one must do is look at the measures announced in recent months that were designed to stymie market losses. –Business Insider
Posted in Age of Decadence, Austerity, Bank Run, Banking Crisis, Bankruptcy, Boom and Bust Cycles, Currency - Economic warfare, Economic Collapse, Fiat Money Printing Fiasco, Financial Market plunge, Financial market turmoil, Flashpoint for war, Geopolitical Crisis, Greed and Corruption, Hoarding Gold, Hoarding Resources, Resource War, Squandered Resources, Struggle for Survival, Troubled Banks, Unemployment rising, Unsustainable Debt Burden, Widening gap between rich and poor | 3 Comments

Analyst warns market could drop 70% – Dow 5,000? Yes, it could happen

Stock Market Plunge
August 2015FINANCIALDon’t be surprised if stock markets stabilize or bounce back in the next couple of days. Markets are due at least a short-term rally after this week’s dramatic plunge. This usually happens after a sell-off, no matter what the next big move is going to be. It doesn’t mean anything. But anyone who automatically assumes this is another easy “buying opportunity” is talking nonsense. For the past couple of years, Wall Street’s perma-bulls have had it their way. They’ve been gloating openly as stocks went up and up and up, seemingly without pause.
It got to the point that those warning about valuations and danger signs had been mocked into silence — or were simply ignored. Not now. I don’t mean to be alarmist or to induce panic, but someone needs to tell the public that there is a plausible scenario in which the U.S. stock market now collapses by another 70% until the Dow Jones Industrial Average falls to about 5,000. The index tumbled more than 3% to 16,460 on Friday. Dow 5,000? Really?
I’m not predicting that will happen, but contrary to what the bulls tell you, it cannot be completely ruled out. And even if that ranks as an outlier and a worst-case scenario, there are other, more likely scenarios where the Dow falls to somewhere between 10,000 and 12,000. In other words, although this might be a buying opportunity, a serious reading of history suggests this week’s sell-off might also be the beginning. Let me say on the record that I am not joining the perma-bears or extreme doom-mongers. I am simply pointing out that the perma-bulls have taken their own arguments way too far. The stock market is not doomed to collapse to oblivion, as some hysterics keep claiming. But it is not certain to keep going up by 10% a year, either. All those claiming that every sell-off is a buying opportunity, and that stocks “always outperform,” are lying to you.
As stock market historian Russell Napier points out in his book “Anatomy of the Bear,” on five occasions in the past 100 years — in 1921, 1932, 1949, 1974 and 1982 — those big downward moves have not ended until share valuations have fallen to just 30% of the replacement cost of company assets. That’s using a powerful, if little-known, economic metric known as Tobin’s q.And, to cut to the chase, if Wall Street stocks followed the same path today that would take the Dow down to about 5,000, and the S&P 500 Index all the way down to around 600. (The S&P 500 slumped more than 3% to 1,971 on Friday.) –Market Watch
Posted in Age of Decadence, Austerity, Banking Crisis, Bankruptcy, Boom and Bust Cycles, Currency - Economic warfare, Economic Collapse, Economic Hardship or Loss, Financial Market plunge, Financial market turmoil, Greed and Corruption, Hoarding Resources, Infrastructure collapse, Resource War, Squandered Resources, Struggle for Survival, Troubled Banks, Unemployment rising, Unsustainable Debt Burden, Widening gap between rich and poor | 3 Comments

Is Canada’s real estate bubble beginning to burst?

Canada's Real Estate
August 2015CANADA More and more office towers in Calgary, Canada’s energy capital, are sitting empty, another sign the country is in the midst of an economic collapse and that the bubbly real estate market is beginning to burst. Layoffs by oil and gas majors have driven vacancy rates in the city to 11.5% in the second quarter of 2015—up from 8.3% last year. Much of the blame has been placed on energy companies having over-extended themselves by leasing too much office space. The reason behind this strategy was the shortage of commercial space leading up to 2007, which left many oil companies unable to find space for their staff. Crude oil’s drop from $100.00 to $42.00 per barrel since last year has made companies scramble for defensive financial strategies. One way to quickly cut operating expenses is to lay off staff and put unused office space on the sublease market. Suncor Energy Inc. (NYSE:SU), for example, has subletted an entire floor in its building, as well as announcing last January it would let go of 1,000 staff. (Source: Financial Post, last accessed August 14, 2015.)
But what happens if there is insufficient demand for it? The slowdown in Calgary’s real estate market is worrying, as it may well be an indicator of a coming economic collapse. Sublease space for rent now accounts for approximately 40% of commercial vacancies in the city, up from 31% last year. The real vacancy rate however may be much higher, and here’s why. While Calgary buildings such as the 58-story Bow are completely leased, not all of the space is used. A July report by Colliers International on Calgary’s real estate market has concluded that “ghost vacancies,” where commercial space is leased but empty, put the actual figure much higher.
(Source: Calgary Herald, last accessed August 14, 2015.) Indeed, vacancies have not kept pace with lay offs, indicating that a significant portion of space has been left empty. But why would anyone hold on to empty offices? Many of the larger energy majors seem to have adopted a wait-and-see approach, attempting to sublease unused space but not actually getting rid of it. This approach hedges against the chance of being caught without enough space if and when oil prices eventually rebound. How long these companies can keep up this strategy, and the effects of large commercial vacancy rates on Calgary’s real estate market, remains to be seen. –CP
Posted in Austerity, Bankruptcy, Boom and Bust Cycles, Depression and Anxiety, Economic Collapse, Economic Hardship or Loss, Fiat Money Printing Fiasco, Financial Market plunge, Greed and Corruption, Hierarchal Control, Infrastructure collapse, Social Meltdown, Squandered Resources, Struggle for Survival, The Pyramid Model, Troubled Banks, Unsustainable Debt Burden, Widening gap between rich and poor | 1 Comment