We Are Moving Into A Time Of Extreme Danger For The Global Economy

In fact, according to Bloomberg, global 10 year bond yields have already dropped to low levels that are absolutely unprecedented…

Taken together, the average 10-year bond yield of the U.S., Japan and Germany has dropped below 1 percent for the first time ever, according to Steven Englander, global head of G-10 foreign-exchange strategy at Citigroup Inc.

That’s not good news. The rock-bottom rates, which fall below zero when inflation is taken into account, show “that investors think we are going nowhere for a long time,” Englander wrote in a report yesterday.

#4 The price of oil crashes.  As I write this, the price of U.S. oil has dipped below $48 a barrel.  But back in June, it was sitting at $106 at one point.  As the chart below demonstrates, there is only one other time in history when the price of oil has declined by more than $50 in less than a year…

Price Of Oil 2015

The only other time there has been an oil price collapse of this magnitude we experienced the greatest financial crisis since the Great Depression shortly thereafter.  Are we about to see history repeat?  For much more on this, please see my previous article entitled “Guess What Happened The Last Time The Price Of Oil Crashed Like This?

#5 A dramatic drop in the number of oil and gas rigs in operation.  Right now, oil and gas rigs are going out of operation at a frightening pace.  During the fourth quarter of 2014, 93 oil and gas rigs were idled, and it is being projected that another200 will shut down this quarter.  As this Business Insider article demonstrates, this is also something that happened during the financial crisis of 2008 and it continued well into 2009.

#6 The price of gasoline takes a huge tumble.  Millions of Americans are celebrating that the price of gasoline has plummeted in recent weeks.  But they were also celebrating when it happened back in 2008 as well.  But of course it turned out that there was really nothing to celebrate in 2008.  In short order, millions of Americans lost their jobs and their homes.  So the chart that I have posted below is definitely not “good news”…

Gas Price 2015

#7 A broad range of industrial commodities begin to decline in price.  When industrial commodities go down in price, that is a sign that economic activity is slowing down.  And just like in 2008, that is what we are watching unfold on the global stage right now.  The following is an excerpt from a recent CNBC article

From nickel to soybean oil, plywood to sugar, global commodity prices have been on a steady decline as the world’s economy has lost momentum.

For an extended discussion on this, please see my recent article entitled “Not Just Oil: Guess What Happened The Last Time Commodity Prices Crashed Like This?

#8 A junk bond crash.  Just like in 2008, we are witnessing the beginnings of a junk bond collapse.  High yield debt related to the energy industry is on the bleeding edge of this crash, but in recent weeks we have seen investors start to bail out of a broad range of junk bonds.  Check out this chart and this chart in addition to the chart that I have posted below…

High Yield Debt 2015

#9 Global inflation slows down significantly.  When economic activity slows down, so does inflation.  This is something that we witnessed in 2008, this is also something that is happening once again.  In fact, it is being projected that global inflation is about to fall to the lowest level that we have seen since World War II

Increases in the prices of goods and services in the world’s largest economies are slowing dramatically. Analysts are predicting that inflation will fall below 2pc in all of the countries that make up the G7 group of advanced nations this year – the first time that has happened since before the Second World War.

Indeed, Japan was the only G7 country whose inflation rate was above 2pc last year. And economists believe that was because its government increased sales tax which had the effect of artificially boosting prices.

#10 A crisis in investor confidence.  Just prior to the last financial crisis, the confidence that investors had that we would be able to avoid a stock market collapse in the next six months began to decline significantly. And guess what?  That is something else that is happening once again…

Investor confidence that the US will avoid a stock-market crash in the next six months has dropped dramatically since last spring.

The Yale School of Management publishes a monthly Crash Confidence Index. The index shows the proportion of investors who believe we will avoid a stock-market crash in the next six months.

Yale points out that “crash confidence reached its all-time low, both for individual and institutional investors, in early 2009, just months after the Lehman crisis, reflecting the turmoil in the credit markets and the strong depression fears generated by that event, and is plausibly related to the very low stock market valuations then.”

Are you starting to get the picture?

And of course I am not the only one warning about these things.  As I wrote about earlier in the week, there are a whole host of prominent voices that are now warning of imminent financial danger.

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