It has been 8 years since the start of the worst financial crisis in the United States since the Great Depression of the 1930s.
In the space of about a year and a half – from December 2007 to June 2009 – the U.S. economy noticed an $8 trillion housing bubble burst and 8.4 million jobs disappear (impacting 6.1% of all those employed), in what has come to be identified as the Great Recession. That crisis, at least for a time, broke American confidence in our economic system.
Sometime between 2014-2015, as jobs rebounded and the national economy quit contracting, commentators and analysts proclaimed this period of decline over. The January 2016 unemployment rate was 4.9 percent – its lowest in 8 years – and the economy added an average of 222,000 jobs a month during 2015.
Yet just as before, fears of a “looming financial crisis” are being sounded by some economists and financial analysts. Should you pay attention to these warnings? Or is this just an sign that economic confidence still has a ways to go?
Formula for crisis
There are some standard components that need to be in play for a financial crisis to come together. First, enough time has to have passed since the previous crash that we collectively fail to remember. Our short attention spans induce us to lose focus on much needed risk aversion.
Next comes a sustained period of growth, during which we become confident that the current good times will never end. As economist Andrew W. Lo has expressed, a long financial boom “breeds an atmosphere of risk tolerance and complacency” and “financial gain actually has some of the same effect on your brain as cocaine.”
Lastly, there must also be an unquestioned idea in the competency of those in power – a trust that central banks, policymakers, and regulators are adequately well-informed and capable to avoid another economic calamity from happening-and carry out their transactions in a non-fraudulent way.
Listen long enough to the regularly contradictory predictions of economists and financial analysts, and these dueling experts start to sound like the ancient soothsayers and fortunetellers, prognosticating about when the wind will change direction or the rain will come down.
Contradictory economic forecasts are a item of the complexity of today’s global economy. In this era of globalization, where goods and services pass across borders to distribute resources to most of the planet’s 7 billion human inhabitants, the global economy is the total of all human economic activity. This perpetual activity is interconnected and unimaginably complex, making precise prediction extremely difficult.
But even if experts cannot accurately forecast a crash in time to change course, economic crises seem to occur with a obvious regularity and frequency. Based on Larry Elliott, economics editor of The Guardian, “a 15-year gap [between crises] is the norm.”
The inevitability of economic crises appears incontrovertible: the 2007-2008 subprime mortgage crisis; the dot-com bubble of the early 2000s; the savings and loan crisis of the 1980s; the energy crisis of the 1970s; the Wall Street crash of 1929 and the ensuing Great Depression. And those are the major economic crisis. If we incorporate all 47 recessions that have hit the United States since 1790, the list gets considerably lengthier.
PROJECT PROPHECY – CIA Insider Interview,
Project Prophecy 2.0 Predicts Terrorist Attacks , Fall of Dollar…
And what many Americans do not know is that their findings were dramatically different than the conclusions reached by the government’s 9/11 Commission.
The CIA determined that bets against the stocks of American and United Airlines reached dramatically heightened levels in the days before Al-Qaeda operatives hijacked the three planes that would be used in the attacks on the Twin Towers and Pentagon.
The fourth plane was downed near Shanksville, Pennsylvania after passengers overtook the terrorists.
From their investigation, the CIA came to an important conclusion.
Using the financial markets, they could identify imminent threats to our national security from terrorists, rival nations, and from internal weaknesses lurking inside our economy.
This led to the launch of a sensitive operation called Project Prophecy. And its mission was clear.
Prevent another 9/11. And it may have done just that.
The system built from Project Prophecy proved its accuracy on August 7, 2006 when it detected the warning signs of an impending terrorist attack.
Three days later in London, a plot to blow up 10 U.S. passenger jets was thwarted. And 24 Pakistani extremists were arrested.
However, one of Project Prophecy’s architects is now warning that the next attack is about to strike us.
Only this time it is going to come from within.
Jim Rickards is a 3-decade veteran of Wall Street’s biggest investment firms and hedge funds. He also helped build the technology infrastructure known as “the brains” of the NASDAQ.
And he is the CIA’s Financial Threat and Asymmetric Warfare Advisor.
In an exclusive interview with Money Morning, Rickards revealed that he and his team have detected a series of dangerous economic signals that predict a fast-approaching $100 trillion meltdown.
And they believe it will lead to an event more severe than the 1930s.
A 25-year Great Depression.
Their estimated date for this catastrophe is
Making matters worse, they believe it is impossible to stop.
Editor’s Note: Money Morning has released their exclusive interview with Jim Rickards to the public. And it’s a must-see for every American who is concerned about our country and their financial security. Click here to view it.
“Everybody knows we have a dangerous level of debt. Everybody knows the Fed has recklessly printed trillions of dollars. These are secrets to no one,” Rickards said in the interview.
“But all signs are now flashing bright red that our chickens are about to come home to roost.”
One of the warning signs Rickards revealed that the CIA is closely monitoring concerns the Misery Index.
Decades back it was created to determine how close our country was to a social collapse. It simply adds the true inflation rate with the true unemployment rate.
However, the Federal Reserve has repeatedly changed the way it has been calculated over the years.
But let us concentrate on the big crises – the ones that are expected to occur so infrequently that they are known as hundred-year events. How is it that several of these once-in-a-century financial disasters have occurred in just the last few decades? Why didn’t we see them coming?
Whether we intend to acknowledge it or not, we live in a world plagued by seemingly unpredictable events – natural disasters, wars, and, naturally, financial crisis. But there is a difference between extremely rare events, or “black swans,” and incidents that are still infrequent, but more likely than they first appear.
Swiss scientist and theoretician Didier Sornette has called this latter category “dragon kings” – kings because of their large size or impact; dragons because of their unique origins. In terms of economic crises, Sornette has explained they are “generated by specific mechanisms that may make them predictable, perhaps controllable.”
What are those mechanisms? Based on Sornette, dragon kings happen because a positive feedback mechanism produces extraordinary growth – think of unbridled optimism that fueled the mortgage bubble. When the positive feedback loop collapses, a dragon king bursts forth. And, based on Sornette, they do so far more regularly than we thought. Therefore, the hundred-year incidents that happen much more frequently than predicted.
But Sornette’s theory goes past explanations of past crises. He states that dragon kings can be predicted. “These processes provide clues that allow us to diagnose the maturation of a system towards a crisis,” he states.
Having been established in 2008 Sornette’s theory is still in its early stages, so nobody understands for sure whether it is a game changer or just wishful thinking.
No matter, it’s advisable to diversify investments, make sure your house is in order, and plan for the worst while hoping, as they say, for the best.
Feel free to leave a comment. We would like to know what you think.