Module 1: Global Systemic Financial Failure
Most people are blissfully unaware of the fact that—even now—certain governments, militaries, and high net worth individuals are preparing for GLOBAL SYSTEMIC FINANCIAL FAILURE and a NEW INTERNATIONAL MONETARY SYSTEM which could occur anytime in the coming months and years!
The serious potential for this system-altering development has significant implications for the general public: the need to prepare for increasing levels of economic turmoil and SOCIAL UNREST that lead to GLOBAL SYSTEMIC FINANCIAL COLLAPSE.
So, while the mainstream media continues to advance the notion that we have averted a Second Great Depression—in this section, we’ll explore what the big boys and girls are saying behind the scenes about the global economy, sovereign debt and the risk for global systemic financial failure in the years ahead.
As we move further along, module by module, in this research area, you will begin to understand the following:
- We are in a state of FINANCIAL WARFARE. This should be monitored closely because, historically, currency wars turn into trade wars which then turn into HOT WAR.
- There is a serious risk for GLOBAL SYSTEMIC FINANCIAL FAILURE in the years ahead that could lead to the demise of the dollar as the world reserve currency and an entirely NEW INTERNATIONAL MONETARY SYSTEM.
According to the US Federal Reserve’s Advisory Council, in May 2013, “Current policy has created SYSTEMIC FINANCIAL RISKS and potential structural problems for banks.”
When Lehman Brothers fell in 2008, the global economy almost collapsed due to reckless lending, excessive risk, and a lack of transparency. Banks stopped lending to each other because they didn’t understand counterparty risk (the risk associated with derivative trading; repayment obligations; liquidity reserves; the value of collateral etc.).
We were all introduced to the idea of institutions that were TOO BIG TO FAIL. Certain financial institutions had become so large and interconnected within the global financial system that their demise threatened to suck the entire world into a global depression.
Today, despite our efforts to shore up risk in the financial sector, our policies have encouraged banks to get larger, more opaque and riskier! That’s right, you heard correctly, banks are taking the same kinds of risks that lead us to the 2008 crash—only, they are taking these risks on a much larger scale!
Today, analysts peg the derivative market at around $700 trillion—10 times the size of the global economy. “The market has grown so unfathomably vast, the global economy is at risk of MASSIVE DAMAGE should even a small percentage of contracts go sour. Its size and potential influence are difficult just to comprehend, let alone assess.”
<Source: Denning, Steve. “Big Banks and Derivatives: Why Another Financial Crisis Is Inevitable.” 8 Jan 2013. Forbes Online. Web. 20 April. 2016. http://www.forbes.com/sites/stevedenning/2013/01/08/five-years-after-the-financial-meltdown-the-water-is-still-full-of-big-sharks/ >
Here’s the thing—systems scientists have recently discovered that complex systems (like the derivatives market… also like the financial system) become MORE COMPLEX and MORE UNSTABLE as time goes on. They evolve until they reach a ‘poised critical state’—way out of balance—where a minor disturbance can cause a disastrous cascade.
Guess what? Capital markets are complex systems—they exhibit all the defining characteristics: diversity of agents, interdependence, connectedness and adaptive behavior.
These kinds of systems defy prediction! Complex systems, like capital markets, cannot be reduced to simple models. In these kinds of systems, easy, mapable dynamics and simple interactions are like flying pigs!
One of the defining features of complex systems is that as the system doubles or triples in its scale, the potential for catastrophic failure increases by factors of 10 (if the system doubles) or 100 (if the system triples).
So… as the derivative market continues to grow unfathomably vast—so does the risk of catastrophic systemic failure!
Unfortunately, Congress will not act to dismantle large banks into more manageable sizes. I think we can all agree that an appropriate size is one that DOES NOT threaten either the national or global economy. Congress will not act to ban derivatives! Unfortunately, Congress appears firmly ensconced within the tentacles of Wall St. lobbyists.
So, the risk will continue to grow!
Think about this—the financial meltdown in 2008 destroyed approximately $60 trillion in wealth between October 2007 and March 2009. The Federal Reserve stepped in with tens of trillions of dollars (in money printing; swap lines etc.) to inject liquidity back into the global market place. Despite all its efforts, the Federal Reserve was barely able to prevent a complete meltdown. As you’ll learn in the modules ahead, the situation was so dire when the Obama administration took office, that the US government contemplated declaring a BANK HOLIDAY.
If the Federal Reserve was barely able to prevent a complete collapse in 2008, what do you think is going to happen when the next collapse occurs—a collapse bigger than 2008? Rest assured, there will be a bigger collapse.
Here are 4 important reasons why we can expect a bigger crisis:
- Systemic problems were not addressed.
- Banks are larger, more opaque and riskier than ever. Mega banks should have been dissolved into smaller units that don’t threaten national or global economies.
- One of the core contributing factors in the 2008 meltdown was lack of transparency and unknown risk brought on by involvement in the derivatives market. In 2007, the derivatives market was $500 trillion. It is now $700 trillion—10 times the size of the global economy. To this day, no one understands the risks in this market. Derivatives should have been banned.
- Commercial and investment banking should be separated. Affiliations between banks and security firms should be banned. Vital aspects of the Glass-Steagal Act should have been reenacted.
- After all the bailouts real growth has not returned. Instead, deflationary pressures (technically, the financial power brokers like to refer to this as disinflation which is supposed to be different from deflation) still loom in the US and EU.
- Governments have depleted their treasuries in addressing the 2008 crisis. Not only have they depleted their treasuries and gone into massive debt but they’ve also expended many of their financial policy options—they’ve depleted many of the financial arrows in their quivers.
- Governments have depleted their reserves in addressing the 2008 crisis. Bailouts on the order of 2008 are no longer a possibility. According to one of the top financial warfare analysts, James Rickards (the go-to-guy for the Pentagon and intelligence community on matters of financial warfare), the only clean balance sheet left among major financial institutions is the IMF. Any crisis will hit countries very hard.
- The capital markets are complex systems. They become more complex and unstable as time goes on. Eventually, they will reach a poised critical state where one variable; one person; one action; one institution will cascade the system.
So, what do you think will happen when the next crisis hits?
According to James Rickards (the go-to guy for financial warfare within US defense and intelligence circles)—the dollar as the reserve currency will most likely be on the chopping block! We’ll get into this later.
In 2013, the World Economic Forum reported, “Five years after the financial crisis, macroeconomic worries continue to weigh heavily on leader’s minds. This is confirmed by data from the World Economic Forum’s Quarterly Confidence Index as well as the Global Risks Perception Survey, in which respondents rated MAJOR SYSTEMIC FINANCIAL FAILURE as the economic risk of greatest systemic importance for the next 10 years.”
<Source: World Economic Forum. “Global Risks 2013.” Web. Accessed 20 April 2016. http://www3.weforum.org/docs/WEF_GlobalRisks_Report_2013.pdf (See pg. 16) >
2 years later, in 2016, concerns over global systemic financial failure still loom large at renowned gatherings like the World Economic Forum (WEF). For several years now, reports have emanated from the WEF highlighting the fact that many of the business, financial and political power brokers in attendance are still VERY WORRIED about the global economy. According to many of them, the financial system is still not functioning correctly and it remains on an untenable trajectory.
For years now, since the start of the 2008 financial crisis, I have repeatedly found news articles highlighting the fact that many of the wealthy members of society (all over the world) are buying remote farms and properties in anticipation of SEVERE ECONOMIC DISTRESS and MASSIVE SOCIAL UNREST.
Some of the top minds in business, finance and politics around the world are worried about the possibility of major systemic financial failure during the next 10 years! As we’ll see later, it’s not just the political and business world that have grave concerns. The national security establishments in America, Britain, Switzerland and Russia consider major systemic financial failure a real threat and, as such, they are preparing!
Stay tuned: We will continue discussing this high risk/high consequence threat in the upcoming modules. Check back periodically as new modules will be uploaded soon.