by Steve St. Angelo, SRSRocco Report:
The U.S. financial system continues to disintegrate even though most Americans hardly notice. The system is being gutted from the inside out… much the same way a chronic disease weakens a patience even before any symptoms are felt. However, we are already experiencing painful symptoms as U.S. economic indicators continue to weaken.
Here are just a few of the recent headlines:
These are just some of the recent headlines pointing to BIG TROUBLE AHEAD. However, the U.S. financial system is in dire shape due to the SUBPRIMING of the entire economy. Today, anyone can purchase a car for little or nothing down and finance it for 84 months. The U.S. housing market is also in the same predicament.
According to the article, Are We Heading for Another Housing Crisis?, published on May 12th this year:
While the economy and home prices have both rebounded, some people have expressed concern we are headed for a repeat housing bubble. As of January 2016, home prices were rising at a rate twice that of inflation, according to the S&P/Case-Shiller U.S. National Home Price Index.
What’s more, Fannie Mae and Freddie Mac have unveiled programs to allow first-time homebuyers to make a purchase with only 3 percent down. Plus, some lenders are using alternate credit scores, which may make loans available to those who can’t get one under conventional credit scoring methods.
So, here we are heading down the same path as we did prior to the 2008 U.S. Investment Banking and Housing collapse. However, this time around its both a Subprime Auto & Housing problem. But, that is just part of the Subprime mess.
As most of you already know, many of the world’s sovereign bonds have negative yields. According to the article, The Financial System Is Breaking Down At An Unimaginable Pace:
In February 2015, the total amount of negative-yielding debt in the world was ‘only’ $3.6 trillion.
A year later in February 2016 it had nearly doubled to $7 trillion.
Now, just five months later, it has nearly doubled again to $13 trillion, up from $11.7 trillion just over two weeks ago.
Think about that: the total sum of negative-yielding debt in the world has increased in the last sixteen days alone by an amount that’s larger than the entire GDP of Russia.
Just like subprime mortgage bonds from ten years ago, these bonds are also toxic securities, since many of are issued by bankrupt governments (like Japan).
Instead of paying subprime home buyers to borrow money, investors are now paying subprime governments.
And just like the build-up to the 2008 subprime crisis, investors are snapping up today’s subprime bonds with frightening enthusiasm.
To see total world negative-yielding debt doubling to $13 trillion in just the past six months is a BLINKING RED LIGHT.
So, not only do we have Subprime Auto & Housing… we also have to include Subprime Govt Bonds. While U.S. Treasuries and bonds are not yet negative-yielding, I believe it is just a matter of time.
As we can see, the U.S. is now becoming a massive SUBPRIME ECONOMY. Unfortunately, it gets much worse. The factor that most analysts have not yet factored into the subprime disaster is energy.
I would like to remind my readers and new followers that it takes energy to run the Auto, Housing & Bond markets. Yes, it takes the burning of energy to allow the global bond markets to function. Basically, Treasuries and Bonds are nothing more than claims on future economic activity. My sympathy goes out to anyone holding onto 20-30 year bonds until maturity. I highly doubt these bonds will ever make it to maturity.
That being said, let’s look at the catastrophe taking place in the U.S. Subprime Energy Industry.
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