ARTICLE

Germany And Japan Tipping The Scales Towards Global Financial Crisis

News Image By Michael Snyder - The Economic Collapse Blog February 11, 2016
Share this article:

On Tuesday junk bonds continued to crash, the price of oil briefly dipped below 28 dollars a barrel, Deutsche Bank was forced to deny that it is on the verge of collapse, but the biggest news was what happened in Japan.  


The Nikkei was down a staggering 918 points, but that stock crash made very few headlines in the western world.  If the Dow had crashed 918 points today, that would have been the largest single day point crash in all of U.S. history.  

So what just happened in Japan is a really big deal.  The Nikkei is now down 23.1 percent from the peak of the market, and that places it solidly in bear market territory.  Overall, a total of 16.5 trillion dollars of global stock market wealth has been wiped out since the middle of 2015.  As I stated yesterday, this is what a global financial crisis looks like.

Just as we saw during the last financial crisis, the big banks are playing a starring role, and this is definitely true in Japan.  Right now, Japanese banking stocks are absolutely imploding, and this is what drove much of the panic last night.  The following numbers come from Wolf Richter...

- Mitsubishi UFJ Financial Group plunged 8.7%, down 47% from June 2015.
- Mizuho Financial Group plunged 6.2%, down 38% since June 2015.
- Sumitomo Mitsui plunged 6.2%, down 26% since May 2015
- Nomura plunged a juicy 9.1%, down 42% since June 2015

A lot of analysts have been very focused on the downturn in China in recent months, but I think that it is much more important to watch Japan right now.

I have become fully convinced that the Japanese financial system is going to play a central role in the initial stages of this new global financial meltdown, and so I encourage everyone to keep a close eye on the Nikkei every single night.

Meanwhile, the stock price of German banking giant Deutsche Bank crashed to a record low on Tuesday.  If you will recall, Deutsche Bank reported a loss of 7.6 billion dollars in 2015, and I wrote quite a bit about their ongoing problems yesterday.

Things have gotten so bad that now Deutsche Bank has been forced to come out and publicly deny that they are in trouble...

Deutsche Bank co-CEO John Cryan moved to quell fears about the banks stability Tuesday with a surprise memo saying its balance sheet "remains absolutely rock-solid."

The comments come as investors grow increasingly nervous about the health of European banks, which have taken a hit on the fall in energy prices and which face rising concerns over their cash levels.

Of course Lehman Brothers issued the same kind of denials just before they collapsed in 2008.  Cryans comments did little to calm the markets, and even Jim Cramer saw right through them...

"You know, Deutsche Bank puts out a note saying, 'listen, dont worry, all good.' Reminds me of JPMorgan saying if you have to say that you're creditworthy then its already too late."

Another thing that Lehman Brothers did just before they collapsed in 2008 was to lay off workers.  We have seen a number of major banks do this lately, including Deutsche Bank...

Cryan, 55, has been seeking to boost capital buffers and profitability by cutting costs and eliminating thousands of jobs as volatile markets undermine revenue and outstanding regulatory probes raise the specter of fresh capital measures to help cover continued legal charges. The cost of protecting Deutsche Banks debt against default has more than doubled this year, while the shares have dropped about 42 percent.

Deutsche Bank is the biggest and most important bank in the biggest and most important economy in the EU, and it has exposure to derivatives that is approximately 20 times Germanys GDP.

If that doesnt alarm you, I dont know what will.

The biggest financial bubble in the history of the world has entered a terminal phase, and the parallels to the last financial crisis have become so apparent that just about anyone can see them at this point.  Just consider some of the ominous warnings that we have seen recently...

Billionaire Carl Icahn, for example, recently raised a red flag on a national broadcast when he declared, "The public is walking into a trap again as they did in 2007."

And the prophetic economist Andrew Smithers warns, "U.S. stocks are now about 80% overvalued."

Smithers backs up his prediction using a ratio which proves that the only time in history stocks were this risky was 1929 and 1999. And we all know what happened next. Stocks fell by 89% and 50%, respectively.

Even the Royal Bank of Scotland says the markets are flashing stress alerts akin to the 2008 crisis. They told their clients to "Sell Everything" because "in a crowded hall, the exit doors are small."

And lets not forget that famous billionaire retail magnate Hugo Salinas Price has warned that the global economy "is going into a depression".

The chaos that we have seen this week is simply a logical progression of the crisis that began during the second half of last year.  If you were to create a checklist of all the things that you would expect to see during the initial stages of a new financial crisis, all of the boxes would be checked.

In the days ahead, keep your eyes on Germany and Japan.

Yes, the Italian banking system is completely collapsing right now, but I believe that what is happening in Germany is going to be the key to the meltdown of Europe, and I am convinced that Deutsche Bank is going to be the star of the show.

Meanwhile, dont underestimate what is taking place in Japan.

The Japanese still have the third largest economy on the entire planet, and their financial system is essentially a Ponzi scheme built on top of a house of cards that has a rapidly aging population as the foundation.

As Japan falls, that will be a signal that financial Armageddon is now upon us.

And after last night, it appears that moment is a lot closer than a lot of us may have thought.




Other News

December 03, 2020A Return To Global Appeasement

Trump believes that to avoid war, the United States needs to display maximum strength. Liberal universalists hold instead that to avoid wa...

December 01, 2020Millions Face Eviction From Homes As 2021 Approaches

Unless there is emergency intervention, tens of millions of Americans could be facing eviction once the holiday season is over. We kicked...

December 01, 2020Pro-LGBT Anglicans Want Evangelicals Stopped From Preaching Against Sin

Jayne Ozanne, a prominent gay campaigner who is a member of the Church of England's General Synod, accused evangelical Christians of holdi...

December 01, 2020Obama Stirs Up Emotions With Anti-Faith Statements

Barack Obama may have written a book called The Promised Land, but if his latest comments are any indication, he won't be leading the Demo...

December 01, 2020Will Biden Tolerate Pay For Slay Funding For Palestinians

Supporters of the Palestinian cause are openly clamoring for the Biden administration to let the Palestinian Authority wriggle out of the ...

November 30, 2020Digital Passports That Confirm Your Vaccination Status Are Coming

For months, there has been speculation about the possibility of some sort of "COVID passport" for international travel, but now it is bein...

November 30, 2020Speaking Out Against Sexual Immorality Will Get You Fired

Christians around the world are quickly learning that there will be no mercy shown for challenging the modern day sexual orthodoxy includi...

Get Breaking News