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20 Warning Signs Of A Global Doomsday

EconMatters's picture




 

Worries of a Lehman-like financial crisis spreading through Europe and the world has made Greece talk of the market lately. Not to let Greece dominate the spotlight, the U.S. debt ceiling debate is also getting to be as traumatic since a failure to raise the debt ceiling could mean imminent default and credit downgrades for the United States sovereign debt.

In the midst of all these different crises, global markets rise and fall in lockstep with news coming out of Europe and the U.S. The U.S. stock market, after suffering a correction phase since April, snapped back last week, scored the best week in two years, but only to retreat again after the long July 4th weekend. The commodity and currency markets are not immune either, with investors switching back and forth between risk-on and risk-off trades.

In this environment, one has to ask ... are there other indicators signaling a global market doomsday?

According to Oxford Analytica, there are 15 "Global Stress Points" ranging from medium to extreme high impact to the entire world. These are listed below ranked by their potential impact by Oxford (see graph). Around 60% of the "stress points" are related to geopolitics, war or unrest, while only about five events could be classified as financial crises.

  1. Dollar Collapse
  2. Taiwan / China Armed Hostility
  3. Israel / Iran Armed Conflict
  4. Mexico State Hollowing
  5. Global Protectionism
  6. Latin America Hydrocarbon Disruption
  7. Iraq State Institutions Collapse
  8. Russia Military Aggression
  9. End of Euro
  10. India / Pakistan War
  11. Pakistan State Collapse
  12. Argentina Sovereign Default 2.0
  13. North Korea Military Conflict
  14. War in North Africa
  15. Lebanon Civil War


(Click to enlarge) Chart Source: Oxford Analytica

For all the rage in the press, the euro's demise is surprisingly not as big a deal as, for instance, China making good on its 60-year threat to Taiwan, or even a much more mundane "global protectionism." And I hate to disappoint China Bears, but it looks whatever problems China has, it is not the one that will tank the world like the dollar and the euro.

Since a U.S. dollar collapse is ranked as the greatest risk to the world, and dollar's fate is largely dependent on if the bond market has faith in Uncle Sam, it might be helpful to add five additional warning signs that the bond market is freaking out (see chart):

  • Prices of bonds maturing start falling (i.e., investors start to demand higher interest rates to hold U.S. government debt).
  • A narrower spread between rates on Treasury bills and other short-term credit or near substitutes, e.g. LIBOR - This would be a sign of waning faith in the U.S. government.
  • A narrower spread between Treasuries and near substitutes - A sign of falling creditworthiness of Uncle Sam.
  • Price spikes in U.S. CDS (credit default swaps, insuring against a U.S. debt default) - According to Markit, the most noticeable movement has occurred in 1-year spreads, which have converged closer to 5-year spreads, and is up about 430% since early April, while 5-year CDS also has risen about 46%.
  • Higher volatility in the U.S. bond market - Another sign of lost confidence from bond investors.


(Click to enlarge) Chart Source: The Washington Post

So far, out of the 20 signs, there's one that's sending up a red signal flare - U.S. sovereign debt CDS, which is directly linked to the dollar (see chart above).

The U.S. does not have control over many of the indicators listed here, but at least the No. 1 risk factor -- the U.S. dollar -- is influenced by the national debt and by the monetary and fiscal policies set by the U.S. government and the Federal Reserve.

The longer the debt ceiling debate lingers, the more likely the bond market would start reacting and demanding higher interest rates. A sovereign credit downgrade as a result of missing the debt ceiling deadline would just translate into billions more in interest payments, piling on to the existing debt.

The United States is not like Iceland or Argentina, resorting to default as retorted by some could mean calamity not only to its citizens, but also to the rest of the world. Unless the government and this Congress get their act together, there will be no bailout, and instead of one lost generation to the Great Recession, there could be multi-generation missed in the next Grand Depression.

EconMatters.com

 

 

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Wed, 07/06/2011 - 21:45 | 1431479 web bot
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You people do good work. I've added you as one of the sites I frequent.

+1000

Wed, 07/06/2011 - 20:46 | 1431384 BorisSDT
Wed, 07/06/2011 - 20:29 | 1431358 The Malamute Kid
The Malamute Kid's picture

The Harry Limes of the banking sector are running the world. In the next 12 months you are going to see some serious shit.

Wed, 07/06/2011 - 20:22 | 1431341 treasurefish
treasurefish's picture

The following link makes a complete mockery of the loser poster "EconMatters!"

 

http://my.firedoglake.com/beowulf/2011/01/03/coin-seigniorage-and-the-irrelevance-of-the-debt-limit/

Wed, 07/06/2011 - 20:37 | 1431370 rufusbird
rufusbird's picture

Thank you for posting that. I have been wanting to say for several weeks now that I think it would be a good idea for the US Treasury to issue a one ounce legal tender fifty dollar silver coin. Likewise, they could also produce a 1/10th of an ounce $200 gold coin. I am sure they would be popular. Maybe that would be their downfall. People would hoard them. As long as the metals prices are below these levels it would be a profitable coinage.

Wed, 07/06/2011 - 22:55 | 1431593 MrSteve
MrSteve's picture

Do the Treasury and FED really want to see Gresham's Law rubbed in their noses? probably not, so they aren't going back to a specie standard anytime soon, if they can prevent it. There are solid reasons ( per D.C. logic ) why we abandoned gold and silver as a basis for our currency.

Wed, 07/06/2011 - 20:29 | 1431356 treasurefish
treasurefish's picture

...for the three (3) sheeple who flagged my posting as junk.

Wed, 07/06/2011 - 20:15 | 1431327 bankruptcylawyer
bankruptcylawyer's picture

out of that big list of things that could seriously disrupt the world. 

 

Global Protectionism and israel/iran armed conflict are the only ones that i can actually agree with. the latter because it would lead to an intolerably high spike in oil prices . 

Wed, 07/06/2011 - 22:24 | 1431538 doesmybuttlookf...
doesmybuttlookfatinthis's picture

Only until Israel smokes them. Then they will pump as much oil as they can to try to bring in as much cash as possible, and the people may finally rise up. 85% of the people of Iran want to be a modern society. But the republican guard is too strong. Along with their gas storage facilities, I would target all the republican guards barracks. If you did it at the right time. You could probably wipe out a large part of them. I think the remainder would have to leave a large contingency in the cities to try and keep the public suppressed.  Conscripts to the army would be just like they were in Iraq. Waiting to give up as soon as they see somebody to give up to.

Wed, 07/06/2011 - 23:24 | 1431632 Goldenhands57
Goldenhands57's picture

See my post above on ABL. Surgical. Not a chance in hell of getting away in time once there is lock. We can also widen the shots.  Nada chance for escape..instant toasty folks. Ever fry grasshoppers on a hot summer day under a magnifying glass? 2,000X and your close to what we CAN do now. Today. Right Now. The citizens of Iran would be free AND totally unhurt in about 4 hours time at the very most. Zero collateral damage. We agree that the People are free thinking and educated. No arguments with the typical Iranian citizen at all. They would be set in motion to establish their own futures as they may see fit, probably a true representative Parlimentary Democracy. Isreal would be welcome to establish free Trade and relations with common Embassy. Isreal has their own issues to work on. Hopefully such stability in Southern Asia would also calm tensions over the Kashmere too. Anyway..we don't need to mobilize nearly to the extent as before nor risk more radiation fallouts...ect..     

Wed, 07/06/2011 - 20:15 | 1431325 Sambo
Sambo's picture

The tsunami is coming and the Bernanks are standing there watching. It is not easy to run on sand.

Wed, 07/06/2011 - 23:22 | 1431640 knowless
knowless's picture

running in sand is easy, what you do is extend your feet like a coyote(think of how their toes are at the bottom, and leverage that they can dig in), you keep on the palms of your feet, and dig your toes in a sprint, it's almost easier in sand than on gravel.

 

run like a wild man, your heels never touch anything unless you're climbing or kicking. always keep moving.

Wed, 07/06/2011 - 20:03 | 1431305 Hannibal
Hannibal's picture

Numbers and details crunching,...irrelevant, not even close.

Wed, 07/06/2011 - 20:00 | 1431298 Bastiat
Bastiat's picture

On the Global Stress Chart, what are the units on the Y axis?

Wed, 07/06/2011 - 19:55 | 1431287 bill1102inf
bill1102inf's picture

None of those things would ever lead to a global metldown whatsoever.

Wed, 07/06/2011 - 19:47 | 1431267 americanspirit
americanspirit's picture

The trouble with rear-view mirrors is that "Objects in the mirror may be closer than they appear". And gaining.

Wed, 07/06/2011 - 19:39 | 1431252 Stuck on Zero
Stuck on Zero's picture

Did these turkeys predict Fukushima?  Did they forsee a Force 10 Icelandic volcano?  A resurgence of SARS?  Greek finance minister shot?  Portugal pulls the plug?  Ireland quits EU?  Dark swans gentlemen.

Wed, 07/06/2011 - 23:29 | 1431650 RockyRacoon
RockyRacoon's picture

I hope you all will excuse my ignorance, but why does Mexico make #4?

Mexico State Hollowing

Wed, 07/06/2011 - 19:33 | 1431231 JW n FL
JW n FL's picture

#1 on the list of shit has hit the fan.. Peak Fucking Affordable Oil!

 

If there is not enough cheap energy to go round.. then expensive energy is going to up the costs of all oil!

 

which means that the Global Trade Phenomenon is a LIE! because wage arbitrage is no longer a viable business strategy..

 

If you do not have trade, you will have war.. but one of the two will be leading the way to economic recovery for all involved!

 

http://www.youtube.com/watch?v=wYuLjGQQ-jg a good easy explanation.

 

Corporations Own the Lobby!

 

The Lobby Owns the Government!

 

Law Enforcement works for the Duly Elected Lobby Whores!

 

“We the People” are Screwed!

 

 

Wed, 07/06/2011 - 18:47 | 1431120 GFORCE
GFORCE's picture

Oxford Analytica shooting fish in a barrel.

Wed, 07/06/2011 - 18:38 | 1431097 treasurefish
treasurefish's picture

Why does ZeroHedge allow "econmatters" to post here?  Is Tyler just throwing us some dolts for us to pummel?  

#1 - The first rule of Fight Club is, you do not talk about Fight Club.

#2 - The second rule of Fight Club is, you DO NOT talk about Fight Club.

#3 - If someone says stop, goes limp, taps out, the fight is over.

#4 - Two guys to a fight.

#5 - One fight at a time.

#6 - No shirts, no shoes.

#7 - Fights will go on as long as they have to.

#8 - If this is your first night at Fight Club, you have to fight.

 

Wed, 07/06/2011 - 22:57 | 1431598 Goldenhands57
Goldenhands57's picture

Ok.. here's my one and only stick. YA001 is part of my History..it's not fantasy and I was part of the team up close and personal every single day for 2 years. This is one VERY bad Bitch! Good luck trying to take her down boys, cause She DOESN't tap out! So..about the idiots that think they have the power in Tehran or NK or anywhere else on this rock for that matter. Dream on you goofy ass dipshit! NOT so! One more thing.. ABL is not only capable of air to air...so the ragheads have no clue what kind of unreal nightmare they are fucking with...just consider this; Tesla thought about..but we did it. I'm sayin it here for all to know.. DON'T make US(A) use this weapon. And stop fuckin with Isreal. Leave them alone! All it will take is SneekyPete to lock on one time and your asses will all be smokin in Hell in about 10 nanoseconds. POOF! Bye Bye~!

http://www.youtube.com/watch?v=6w-ql8msl0U

Wed, 07/06/2011 - 18:17 | 1431052 geno-econ
geno-econ's picture

College student loans now exceeds amount of total credit cards outstanding. Even worse college loans are not forgivable through personal bankrupcy. Your right, its the next bubble especially with lingering long term unemployment. Thank You American Bankers

Wed, 07/06/2011 - 19:44 | 1431262 DosZap
DosZap's picture

Even worse college loans are not forgivable through personal bankruptcy

 

This issue is not a huge problem.(compared to others facing us).

The reason, ex-students with no jobs, cannot pay anything.

How are you going to get blood from a turnip?.

You cannot.

So, since we know their will be NO economic turnaround,nor increase in job creation, the .gub is SOL.

So are the ex-students.

Alternative, live at home, w/parents or form groups to commune together using $9.00/$11.00 an hour jobs just to get BY.

 

That's the beauty of a system that penalizes savers,people in debt up to their kiesters, cannot pay back any loans.

No matter what kind.

Wed, 07/06/2011 - 18:39 | 1431094 doesmybuttlookf...
doesmybuttlookfatinthis's picture

I would take out Israel vs. Iran. And replace it with those two issues (housing/school loan), As Israel would completely smoke Iran. Very short war. How? Iran has no gas production. Its all in storage. A few cruise missiles over their storage tanks and Irans tanks couldn't make it to the boarder of Iraq.  If the tanks did make it There is a missile system (the name eludes me) the USA (and therefor the Israelis) has, it drops magnetic hot copper explosives.  I understand that we used it only once in the first gulf war. A convoy of 60 mechanized vehicals were coming at one of our rifle recon companies, they called in the strike. And the bomblets hit the convoy, injecting hot copper into the manned areas of the vehicals. Didn't need to use it again.

Wed, 07/06/2011 - 19:02 | 1431155 BigDuke6
BigDuke6's picture

I love the smell of hot copper on flesh in the morning...

Your comment 'the USA (and therefor the Israelis)..' 

do you ask why?  copper is expensive, why hand it out.

 

Wed, 07/06/2011 - 20:04 | 1431300 doesmybuttlookf...
doesmybuttlookfatinthis's picture

If I were Israel I would explode EMPs above all those lovely nuke sites.  The reactors would go critical and irradiate the sites like fukushima.  All we would have to say is "What do you think would happen when friggin rug makers mess with the atom"? No more Iran nuke problem. And we wouldn't need to worry about them cutting off the oil. That would be like them using a chainsaw to clip their toe nails.

Wed, 07/06/2011 - 22:18 | 1431531 snowball777
snowball777's picture

Does your mommy know you're using her computer?

Wed, 07/06/2011 - 22:27 | 1431544 doesmybuttlookf...
doesmybuttlookfatinthis's picture

My Mommy died last Christmas. Thank you for asking.

Wed, 07/06/2011 - 18:12 | 1431045 apberusdisvet
apberusdisvet's picture

In other words:  you better raise the debt ceiling America, because the NWO is coming, and the American Military is required to enforce the asset stripping of all nations that get in the way.

Wed, 07/06/2011 - 18:30 | 1431081 BlackholeDivestment
BlackholeDivestment's picture

...well said.

and to all still out in the field, ''get a clue already''.

...at least Ron Paul got the majority military vote last time around, which is an indication that military people get it more than the general population does. I can't imagine being in the field right now though, and killing in the name of http://www.youtube.com/watch?v=fkuOAY-S6OY 

...no wonder PTSD etc... is such a issue.

Wed, 07/06/2011 - 18:31 | 1431067 BlackholeDivestment
BlackholeDivestment's picture

...amazing.

Wed, 07/06/2011 - 18:12 | 1431040 doesmybuttlookf...
doesmybuttlookfatinthis's picture

They neglected to mention the risk to banks due to housing. I have already negotiated 1 home loan mod. Now they say I can do it again.  Or what I think is a ticking time bomb...........school loans.  Exactly what do they think these 20 and 30 somethings are going to do about their loans, now that they can't get a job paying more then $11.00 (My son has two degrees, and has never made more) an hour.

 

http://www.youtube.com/watch?v=8qrriKcwvlY

Wed, 07/06/2011 - 19:31 | 1431227 Mr. Foot The Bill
Mr. Foot The Bill's picture

Follow the money in the closed loop process. Spin cycle is debt servant. 

 

http://www.ritholtz.com/blog/wp-con...loan-scheme.jpg

 

$$$

 

Wed, 07/06/2011 - 18:06 | 1431036 jm
jm's picture

If oxford analytica is more worried about the dollar than the euro right now, I would avoid taking any advice from them.

Wed, 07/06/2011 - 18:41 | 1431104 hambone
hambone's picture

Actually makes sense as the dollar will be used to prop up the Euro (along w/ Chinese Euro periphery bond buying).  To most folks amazement, dollar will continue weakening against the Euro so long as US and China do wonder powers twin action to maintain the insolvent Ponzi scheme...only problem comes when folks start looking at the dollar...no one left to prop it up once it starts to go.  BB will only be left to leave the printing press on 24/7 autopilot.

Wed, 07/06/2011 - 18:38 | 1431098 jm
jm's picture

Anybody else notice how "rear-view mirror" this list is?

Always worrying about yesterday's problems.

 

Wed, 07/06/2011 - 21:29 | 1431448 mayhem_korner
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patheticus maximus

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