GEAB N°65: Global Systemic Crisis 2H2012! Convergence of 4 Explosive Factors – Banks-Stock Exchanges-Pensions-Debts!

• It appears the global economic, financial and monetary collapse will happen in 2H2012! Aug-Oct 2012?? Followed by Greater Middle East war leading to WW3! Let’s hope not!
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  GEAB N°65 is available! Global systemic crisis / Second half of 2012 – Convergence of four explosive factors: Banks-Stock Exchanges-Pensions-Debts! 
  by http://www.leap2020.eu/ 
  Whilst waiting for Euroland to equip itself, by the end of 2012, with a medium to long term common political, economic and social project, especially following the election of the new French president François Hollande, anticipated many months ago by LEAP/E2020, players will remain prisoners of the short-term reflexes related to the sudden Greek political tremors, the uncertainties over Euroland governance and to the risks in public debts.
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  At the same time, in the United States, the disappearance of the illusion of a recovery (1) combined with the renewal of concerns over the American financial sector’s state of health (of which J P Morgan has just illustrated the fragility) and the big comeback of the country’s debt problem is leading economic and financial players to contemplate an increasingly worrying future (2).
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  In the United Kingdom, the country’s return to recession is combining with the failure to control deficits and the rise of working-class anger in the face of an austerity which has however only just begun (3).
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  In Japan, economic sluggishness and the weakening of exports in a context of world recession (4) have brought the spectrum of the country’s excessive debt back to the surface.
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  In this context, according to LEAP/E2020, the second half of 2012 will be the preferred moment for the convergence of four explosive factors for the Western economies: banks, stock exchanges, pensions and debts.
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  For economic, financial or political players as for simple households, this convergence will cause major risks to weigh on the state of their finances as well as on their aptitude to face the challenges to come.
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  Therefore, in this GEAB issue our team expands on its anticipations concerning these four explosive factors of the second half of 2012 as well as the recommendations to minimize their negative consequences. In addition, LEAP/E2020 sets out its new anticipation on the global systemic crisis’ consequences as regards international languages (on a world level and in Europe) out to 2030 in order to help parents and children, as well as teaching institutions, make the correct language learning choices today.
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  In this GEAB N°65 press release, our team has chosen to introduce the explosive factor relating to public and private debt.
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  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…).
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  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.
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  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.
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  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).
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  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.    
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  From the end of summer 2012, the return of the topic of the United States’ unmanageable debt, related to the automatic budget reductions imposed in the event of Congress’ non-agreement on debt reduction, will start a “Taxmageddon (10) » in the USA. One will thus witness the remake of the detonator-bomb tandem that European and American debts already played with in summer 2011, but this time in a much more powerful version. In fact, if fears of seeing the Euro and Euroland exploding have disappeared (11), they will be replaced by a danger much more alarming to the markets: the massive and sudden monetization of US debt (12).
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  In addition, this situation will show up in the United States in a context of complete political paralysis (13), with a Congress partitioned by the emergence of radical factions in the Republican (“Tea-Party”) as well as the Democrat party (“Occupy Wall Street”) (14).      

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