GLOBAL FINANCIAL MELTDOWN: Convergence of 4 Explosive Factors

Banks, Stock Exchanges, Pension Funds, Debts – Sovereign debt & deadly private debt.. $30 trillion of phantom assets – Published on Global (first on GEAB no. 65 – 2012-05-16), May 31, 2012.

… Debts: difficult to manage sovereign debt and deadly private debt … creditors painfully approach the day of reckoning and people an explosion of anger.

LEAP/E2020 announced it in 2008 and repeated it many times since. There was approximately 30 trillion USD of phantom assets in the world financial system of which about 15 trillion USD remains, which will mostly fly off by the end of 2012. The good news is that as from then, one can seriously contemplate the rebuilding of a healthy world financial system.   

The bad news is that is during the quarters to come this 15 trillion USD will go up in smoke. That implies, of course, as we have previously suggested, the bankruptcy (and/or rescue by the States) of 10% to 20% of Western banks. And this time, unlike 2008/2009, the shareholders will be the first victims (including in the United States), whatever the priority of their rights (5). Only shareholders carrying significant geopolitical weight will be treated with consideration (sovereign funds, friendly States…).

As regards private debts, households will mainly, in particular in the United States and the United Kingdom, have to face the consequences of the increase in the resulting insolvency rates which will affect them on their own. Caught in the trap of austerity and recession, the Western States no longer have the wherewithal to help the middle class as long as growth hasn’t picked up a little bit. And sadly, that won’t be the case by the end of 2012. Moreover, in the United States one is currently seeing the student debt issue in the process of turning itself into a “subprime encore” (6). Increasing fees due to the end of a Federal state grants policy and political paralysis in Washington against attempts to control the federal deficit are in the process of creating a disaster for millions of young Americans and their parents.

In Europe, the United Kingdom has already decided to let its middle class face its record debt alone. That comes down to causing it to fall into the underprivileged class. The next few months will see a new sudden confrontation between this British middle class and its leaders almost exclusively belonging to the upper-class.

On the continent, via votes rejecting leaders who were disciples of austerity as the one and only solution to the public debt crisis, the people have opened a major democratic confrontation with the elite in place for nearly twenty years, and at creditors’ beck and call. The attempt which personifies the new French president, François Hollande, to open a middle way between austerity and Keynesian reflation which have both failed or are impossible politically or budget-wise, will succeed (because it’s the only politically and budgetary viable one from now on (7)) but not before the end of 2012 (8).

Meanwhile, sudden political tremors as in Greece and complex negotiations at Euroland’s core will dominate the agenda, making creditors and their exhalation, and the markets increasingly nervous (9). And this market nervousness is heightened by the awareness of the infinite brittleness of the Wall Street and City financial institutions vis-a-vis the risk of non-repayment of debts: national or private. They are almost the last assets on their balance sheet from which they still hope to be able to recover significant value … (full text and chart2 and Notes 1 to 14).


Germany’s six-point plan for sweatshop Europe, on GLobal, by Peter Schwarz, May 30, 2012;

China seeks free path to farmland buy-up, on Food Crisis and the Global Land Grab, by Leslie White, May 30, 2012;

Enough capital for African farming, but investors want viable entrepreneurs, on Food Crisis and the Global Land Grab, by JACO MARITZ, May 30, 2012;

Cameroon: Stop oil palm plantations from destroying Africa’s ancient rainforests, on Food Crisis and the Global Land Grab, by Cultural Survival, May 30, 2012.

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