You must be aware, an economic global collapse it's on the corner.
The global economy (meaning modern life as we know it) is about to totally, permanently, and unrecoverable crash.
today, very few people realise just how close we really are to the end (in terms of our modern global economy)
Many people are unaware, but in the fall of 2008 [that's the spring of 2008 in the southern hemisphere], we were within a few hours of the entire banking system shut down. Banks were on rolling notice and were within hours of being locked and electronic commerce turned off.
The last crisis was 10 years ago already a decade.
The 2008 financial crisis was the worst economic disaster since the Great Depression of 1929. It occurred despite Federal Reserve and Treasury Department efforts to prevent it.
It led to the Great Recession. That's when housing prices fell 31.8 percent, more than the price plunge during the Depression. Two years after the recession ended, unemployment was still above 9 percent. That's not counting discouraged workers who had given up looking for work.
Causes.
The first sign that the economy was in trouble occurred in 2006. That's when housing prices started to fall. At first, realtors applauded. They thought the overheated housing market would return to a more sustainable level.
Realtors didn't realize there were too many homeowners with questionable credit. Banks had allowed people to take out loans for 100 percent or more of the value of their new homes. Many blamed the Community Reinvestment Act. It pushed banks to make investments in subprime areas, but that wasn't the underlying cause.
The Gramm-Rudman Act was the real villain. It allowed banks to engage in trading profitable derivatives that they sold to investors. These mortgage-backed securities needed home loans as collateral. The derivatives created an insatiable demand for more and more mortgages.
The Federal Reserve believed the subprime mortgage crisis would remain confined to the housing sector. Fed officials didn't know how far the damage would spread. They didn't understand the actual causes of the subprime mortgage crisis until later.
Hedge funds and other financial institutions around the world owned the mortgage-backed securities. The securities were also in mutual funds, corporate assets, and pension funds. The banks had chopped up the original mortgages and resold them in tranches. That made the derivatives impossible to price.
Why did stodgy pension funds buy such risky assets? They thought an insurance product called credit default swaps protected them. A traditional insurance company known as the American International Group sold these swaps. When the derivatives lost value, AIG didn't have enough cash flow to honor all the swaps.
Banks panicked when they realized they would have to absorb the losses. They stopped lending to each other. They didn't want other banks giving them worthless mortgages as collateral. No one wanted to get stuck holding the bag. As a result, interbank borrowing costs, known as Libor, rose. This mistrust within the banking community was the primary cause of the 2008 financial crisis.
Costs.
In 2007, the Federal Reserve began pumping liquidity into the banking system via the Term Auction Facility. Looking back, it's hard to see how they missed the early clues in 2007.
The Fed's actions weren't enough. In March 2008, investors went after investment bank Bear Stearns. Rumors circulated that it had too many of the toxic assets. Bear approached JP Morgan Chase to bail it out. The Fed had to sweeten the deal with a $30 billion guarantee. Wall Street thought the panic was over.
Instead, the situation deteriorated throughout the summer of 2008. Congress authorized the Treasury Department to bail out mortgage companies Fannie Mae and Freddie Mac. The Fed used $85 billion to bail out AIG. In October, this rose to $150 billion.
On September 19, 2008, the crisis created a run on ultra-safe money market funds. That's where most firms put any excess cash they might have accrued by the end of the day. They can earn a little interest on it overnight. Banks use those funds to make short-term loans. During the run, companies moved a record $140 billion out of their money market accounts into even safer Treasury bonds. If these accounts went bankrupt, business activities and the economy would grind to a halt.
Treasury Secretary Henry Paulson conferred with Fed Chair Ben Bernanke. They submitted to Congress a $700 billion bailout package. Their fast response convinced businesses to keep their money in the money market accounts.
Republicans blocked the bill for two weeks. They didn't want to bail out banks. They didn't approve the bill until global stock markets almost collapsed. It was one of the 33 critical events in the 2008 financial crisis timeline.
But the bailout package never cost the taxpayer the full $700 billion. The Treasury Department only used $350 billion to buy bank and automotive company stocks when the prices were low. By 2010, banks had paid back $194 billion into the Troubled Asset Relief Program fund.
The other $350 billion was for President Obama, who never used it. Instead, he launched the $787 billion economic stimulus package. That put money directly into the economy instead of the banks. It was enough to end the financial crisis in July 2009.
Now we see strong signs of what could be the beginning of the worst economic collapse ever, the world economy could be plunged into chaos by the deepening financial turmoil in Argentina and Turkey, experts have warned.
Since Turkey suffered an economic crisis of confidence in August – with its currency falling by some 25% that month – emerging markets around the world, from South Africa to Indonesia, have also experienced plummeting currencies and an outflow of foreign investment.
Argentina, which had stabilized after a crisis earlier in the year, has fallen back into emergency mode, increasing interest rates to 60%. Its currency, the peso, has fallen by 45% in 2018 and 24% in August.
Why are all these different countries, on different continents, with different economic situations and leadership suffering from the same symptoms?
The short answer is uncertainty over the global economy brought about by the economic management of the United States.
Firstly, the US economy is growing very fast at the moment. Pumped up by the tax cuts passed by Congress last year, as well as President Donald Trump cutting environmental and other “red tape” regulations, the US stock market has been hitting record highs, and the economy has been growing at over 4%, an extremely strong rate for the world’s largest economy. At the same time, the US Federal Reserve is beginning to raise interest rates, after a decade of keeping them as low as possible.
Quarterly growth of the real GDP in the United States from 2011 to 2018
The strength of US markets, combined with increasing interest rates, has attracted investors, who have had their money into higher-growth emerging markets. This flow of investment funds into the US has, in turn, increased the value of the US dollar, which makes the US an even more attractive destination for investors.
Add to these factors the uncertainty of a trade war, with the US putting tariffs on foreign goods – with latest reports indicating potentially up to $200 billion just on of Chinese imports, not including all the tariffs on steel, aluminium and other products from other countries. Whatever the outcome of a trade war, it is likely that smaller markets will come out of it worse than the US. This too is encouraging investors to look for safer places to put their money – namely America.
Reliance on foreign funding
Meanwhile, in each of the different emerging markets, individual economic stories are playing out in different ways but with the same outcome – loss of confidence by investors, an outflow of funds, and a fall in the value of their currencies. The triggers for the currency collapses in Argentina, Turkey, South Africa and Indonesia have all been different, but they share one thing in common – a disproportionate reliance on foreign funding for trade and government deficits.
Argentina was suffering earlier in the year after the worst drought in 50 years hit production of maize and soybeans, both important export crops. Building on economic weaknesses that were the result of liberalizing policies enacted over the last few years, it was enough to tip the country into crisis. The IMF was called in, and in June pledged a $50 billion loan to tide the country over.
Then, in September, Turkey was hit when a political row with the US over the detention of an American priest became tariffs on Turkish goods, and sanctions on some of Turkey’s leaders, and that became the trigger for investors to rethink their Turkish strategies.
Almost uniquely for an ASEAN country, Indonesia has a big current-account deficit (it hit over $2 billion in July, the highest it has been in five years), and has Asia’s highest external debt, at 35% of GDP. Those factors have made it vulnerable, its currency has hit the lowest point since the financial crisis over a decade ago, and the country’s central bank has been forced to hike interest rates.