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The stock market is not crashing yet, but there are lots of other market crashes happening in the financial world right now.  Just like we saw back in 2008, it is taking stocks a little bit of extra time to catch up with economic reality.  But almost everywhere else you look, there are signs that a financial avalanche has begun.  Bitcoins are crashing, gold and silver are plunging, the price of oil and the overall demand for energy continue to decline, markets all over Europe are collapsing and consumer confidence in the United States just had the biggest miss relative to expectations that has ever been recorded.  In many ways, all of this is extremely reminiscent of 2008.  Other than the Bitcoin collapse, almost everything else that is happening now also happened back then.   So does that mean that a horrible stock market crash is coming as well?  Without a doubt, one is coming at some point.  The only question is whether it will be sooner or later.  Meanwhile, there are a whole lot of other economic crashes that deserve out attention at the moment.

The following are 11 economic crashes that are happening RIGHT NOW…

#1 Bitcoins

As I write this, the price of Bitcoins has fallen more than 70 percentfrom where it was on Wednesday.  This is one of the reasons why I have never recommended Bitcoins to anyone.  Yes, alternative currencies are a good thing, but there are a lot of big problems with Bitcoins.  Why would anyone want to invest in a currency that could lose 70 percent of its purchasing power in just two days?  Why would anyone want to invest in a currency where a single person can arbitrarily decide to suspend trading in that currency at any time?

An article by Mike Adams of Natural News described some of the things that we have learned about Bitcoins this week…

#1) The bitcoin infrastructure cannot handle a selloff. Once the rush for the exits gains momentum, you will not be able to get out. Only those who sell early will be able to exit the market.

#2) The bitcoin infrastructure is subject to the whims of just one person running MTGox who can arbitrarily decide to shut it down whenever he thinks the market needs a “cooling period.” This is nearly equivalent to afinancial dictatorship where one person calls the shots.

#3) Every piece of bad news will be “spun” by exchanges like MTGox into good-sounding news. As bitcoin was crashing yesterday by 60% in value in mere hours, MTGox announced it was a “victim of our own success!” So while bitcoin holders watched $1 billion in market valuation evaporate, MTGox called it a success. Gee, then what would you call it when bitcoin loses 99%? A “raging” success?

#2 Gold

The price of gold was down by about 4 percent on Friday.  Gold has now fallen below $1500 an ounce for the first time since July 2011.  Overall, the price of gold has fallen by about 10 percent since the beginning of the year, and it is about 22 percent below the record high set back in September 2011.

Yes, the price of gold is likely being pushed down by the banksters.  And yes, gold is a fantastic investment for the long-term.  But there will be times when the price of gold does fall dramatically just like we saw back in 2008.

#3 Silver

The price of silver fell by about 5 percent on Friday.  If it falls much more it is going to be at a level that presents a historically good buying opportunity.

Just like gold, there will be times when the price of silver swings dramatically.  But the truth is that silver is probably an even better long-term investment than gold is.

#4 Oil

The price of oil declined by about 3 percent on Friday.  Many will consider this a positive thing, but just remember what happened back in 2008.  Back then, the price of oil dropped like a rock.  If the price of oil gets below $80, that could very well be a clear signal that a major economic crisis is about to happen.

#5 Consumer Confidence

As I mentioned above, consumer confidence in the U.S. just had its biggest miss relative to expectations that has ever been recorded.  The following is from an article posted on Zero Hedge on Friday…

Well if this doesn’t send the market into all-time record high territory, nothing ever will: seconds ago the UMich Consumer Confidence plummeted from 78.6 to 72.3, on expectations of an unchanged 78.6 print. This was not only a 9 month low in the index, but more importantly the biggest miss to expectations in recorded history!

#6 Retirement Accounts

According to Wells Fargo, the number of Americans taking loans from their 401(k) accounts has risen by 28 percent over the past year…

Through an analysis of participants enrolled in Wells Fargo-administered defined contribution plans, the bank announced today that in the fourth quarter of 2012, there was a 28 percent increase in the number of people taking loans out from their 401(k) and that the average new loan balances increased to $7,126 from those taken out in the fourth quarter of 2011 – a 7% increase from $6,662.

Of the participants who took out loans, the greatest percentage were to people in their 50s (34.2%), followed by those in their 60s (28.9%) and then by those in their 40s (27.3%). The increase among participants in their 50s was nearly double the increase among those under 30. This is based on an analysis of a subset of 1.9 million eligible participants in retirement plans that Wells Fargo administers.

“The increased loan activity particularly among older participants is concerning because those are the years when workers can start to make ‘catch-up’ contributions and really need to focus on preparing for retirement,” said Laurie Nordquist, director of Wells Fargo Retirement.

#7 Casino Spending

Casino spending is declining again.  Many people (including myself) would consider this to be a good thing, but casino spending is also one of the most reliable indicators about the overall health of the economy.  Remember, casino spending crashed during the last financial crisis as well.  That is why it is so alarming that casino spending is now back to levels that we have not seen since the last recession.

#8 Employment In Greece

Over in Europe, things just continue to get worse.  According to numbers that were just released, the unemployment rate in Greece has soared to27.2 percent, which was up from 25.7 percent the previous month.  That means that the unemployment rate in Greece rose by 1.5 percent in just a single month.  That is not just a crash – that is an avalanche of unemployment.

#9 European Financial Stocks

European financial stocks have been hit particularly hard lately.  And for good reason actually – most of the major banks in Europe are essentially insolvent at this point.  This week, European financial stocks fell to seven month lows, and this is probably only just the beginning.

#10 Spanish Bankruptcies

According to Reuters, the number of Spanish companies going bankrupt has risen by 45 percent over the past year…

A record number of Spanish companies went bust in the first quarter of 2013 as companies remained under intense pressure from tight credit conditions and meager demand, a study showed on Monday.

The 2,564 firms filing for insolvency proceedings in first three months of the year was a 10 percent rise from the previous quarter and a 45 percent increase on the same period in 2012, the survey by credit rating agency Axesor said.

#11 Demand For Energy

Just like we saw back in 2008, the overall demand for energy in the United States is falling rapidly.  There are some shocking charts that prove this that were recently posted on Zero Hedge that you can find right here.

Yes, it is good for people to use a bit less energy, but it is also a clear indication that economic activity is really starting to slow down.

But despite everything that you have just read, the Dow and the S&P 500 have been setting new record highs.

And if you listen to the mainstream media, you would think that thisstock market bubble can continue indefinitely.

Fortunately, there are a few voices of reason out there.  For example, just check out what Marc Faber recently told CNBC…

In the near-term, the U.S. stock market is overbought and adding that any more near-term gains portend big trouble for the market, “The Gloom, Boom & Doom Report” publisher Marc Faber told CNBC on Monday.

“If we continue to move up, the probability of a crash becomes higher,” Faber predicted in a “Squawk Box” interview, saying it could happen “sometime in the second half of this year.”

As I have written about previously, a bubble is always the biggest right before it bursts.  I hope that we still have at least a little bit more time before it happens, but I wouldn’t count on it.

The economic fundamentals tell us that the stock market should be plunging, not rising.  At some point the boys over on Wall Street will get the message and the market will catch up to reality very, very rapidly.

But for the moment, the American people are feeling really good.  According to CNN, Americans are now more optimistic than they have been in six years…

As the stock market continues to show record highs, the number of Americans who say things are going well in the country has reached 50% for the first time in more than six years, according to a new national survey.

So what do you think will happen for the rest of the year?

Do you think that the good times will continue to roll, or do you believe that the bubble is about to burst?

The Economic Collapse

The Market-Ticker

Discussion below (registration required to post)

Debt.  There isn’t a day that passes as of late that the issue of debt doesn’t arise.  Federal debt and consumer debt (including mortgages) are of the most concern due to its impact on the domestic economy.   Debt is, by its very nature, a cancer on economic growth.  As debt levels rise it consumes more capital by diverting it from productive investments into debt service.  As debt levels spread through the system it consumes greater amounts of capital until it eventually kills the host.  The chart below shows the rise of credit market debt and its impact on both personal savings and economic growth.

From the 1950’s through the late 1970’s interest rates were in a generally rising trend with the Federal Funds rate at 0.8% in 1954 and rising to its peak of 19.1% in 1981.  Of course, during this time the U.S. was the manufacturing and production powerhouse of the entire global economy post the wide spread devastation of Europe, Germany and Japan during WWII.  The rebuilding of Europe and Japan, combined with the years of pent up demand for goods domestically, led to a strongly growing economy and increased personal savings.

However, beginning in 1980 the world changed.  The development of communications shrank the global marketplace while the rise of technology allowed the U.S. to embark upon a massive shift to export manufacturing to the lowest cost provider in order to import cheaper goods.  The deregulation of the financial industry led to new innovations in financial engineering, easy money and wealth creation through the use of leverage which led to a financial boom unlike any seen in history.  The 80-90′s was a period of unrivaled prosperity and the envy of every nation on earth.

Unfortunately – it was the greatest economic illusion ever witnessed.

The reality is that the majority of the aggregate growth in the economy was financed by deficit spending, credit creation and a reduction in savings.  In turn this reduced productive investment in the economy and the output of the economy slowed.   As the economy slowed, and wages fell, the consumer was forced to take on more leverage to maintain their standard of living which in turn decreased savings.   As a result of the increased leverage more of their income was needed to service the debt – and with that the ”debt cancer” engulfed the system.

The Austrian business cycle theory attempts to explain business cycles through a set of ideas. The theory views business cycles “as the inevitable consequence of excessive growth in bank credit, exacerbated by inherently damaging and ineffective central bank policies, which cause interest rates to remain too low for too long, resulting in excessive credit creation, speculative economic bubbles and lowered savings.”

In other words, the proponents of Austrian economics believe that a sustained period of low interest rates and excessive credit creation results in a volatile and unstable imbalance between saving and investment.   In other words, low interest rates tend to stimulate borrowing from the banking system which in turn leads, as one would expect, to the expansion of credit.   This expansion of credit then, in turn, creates an expansion of the supply of money.

Therefore, as one would ultimately expect, the credit-sourced boom becomes unsustainable as artificially stimulated borrowing seeks out diminishing investment opportunities. Finally, the credit-sourced boom results in widespread malinvestments. When the exponential credit creation can no longer be sustained a “credit contraction” occurs which ultimately shrinks the money supply and the markets finally “clear” which then causes resources to be reallocated back towards more efficient uses.

The chart below shows the increasing levels of money supply and debt versus the changes in economic and wage growth.  The impact of debt on the economy remains unrecognized by policy makers and central bankers who have failed to understand what the current downturn encompasses.  Therefore, these same individuals continue to chase economic theories based on a mistaken belief that the current recession is an ordinary period of falling aggregate demand.  However, the reality is something far different.

The reason that the policies which have been enacted by the current Administration up to this point have all but failed, be it “cash for clunkers”  to “Quantitative Easing”, is because they were designed to either drag future consumption forward or to slow the deleveraging process.  The Keynesian view that “more money in people’s pockets” will boost consumer spending, and ultimately grow GDP, has clearly been wrong.  It hasn’t happened in 30 years.   What is missed is that things like temporary tax cuts, or one time injections, don’t create economic growth but merely reschedules it.  While the average American will act on a near-term increase in their take home pay – any increased consumption in the present will be matched by a decrease later when the tax cut is revoked.

This is, of course, assuming the balance sheet at home hasn’t broken.  The problem today is that for only the second time in the history of the United States we are in the process of deleveraging the balance sheet of the U.S. economy.   As we saw during the period of the“Great Depression” most economists thought that the simple solution was just more stimulus.   Work programs, lower interest rates, government spending all didn’t work to stem the tide of the depression era.

The problem is that during a “balance sheet” recession the consumer is forced to pay off debt which detracts from their ability to consume.   This is the one facet that Keynesian economics doesn’t factor in. More importantly it also impacts the production side of the equation as well since no act of saving ever detracts from demand.  Consumption delayed is merely a shift of consumptive ability to other individuals, and even better, money saved is often capital supplied to entrepreneurs and businesses that will use it to expand, and hire new workers. 

So, while classical economics says that production comes first, the problem becomes that during a “balance sheet recession” the economy is put into a stranglehold for productive investment. The continued misuse of capital and continued erroneous monetary policies have instigated not only the recent downturn but actually 30 years of an insidious slow moving infection that has destroyed the American legacy.

This is why we need real reform in government that leads to a smaller government, more clarity for businesses through pro-growth policies, real regulation of Wall Street which separates banks and brokerages, as well as programs and subsidies for bringing back to America those jobs that require a little hard work and a little bit of sweat but create a whole lot of pride and prosperity along the way.

It’s time for our leaders to wake up and smell the burning of the dollar – we are at war with ourselves and the games being played out by Washington to maintain the status quo is slowing creating the next crisis that won’t be fixed with monetary bailout.

Lance Roberts – Street Talk Live

Standard of living, meet falling US dollar – how a falling US dollar benefits banks at the expense of working Americans.

There is certainly a cost to a falling US dollar.  Many Americans are living the consequences of this multi-decade long trend.  The Federal Reserve has only added fuel to this trend but many families are now realizing that there does come a cost to unrelenting debt based solutions to fiscal problems.  Shopping at the local grocery store I’ve noticed that some items have doubled in the last few years.  Fueling up is also more expensive.  The issue with living on a low dollar policy is that eventually, you end up in a low wage capitalist system.  The easy money slowly inflates away especially on global items.  We are seeing this in the US in various arenas especially with higher education.  The end result is that the standard of living for the vast majority of Americans has fallen dramatically in the last few decades.

US dollar trend

The US dollar has been on a multi-decade long trend that has resulted in a 50 percent haircut:

Think about what this has done in a more practical sense:

-Energy is more expensive because it is traded on a global market (you are trying to compete with others with a declining currency)

-Education.  Massive debt has devalued the dollars even further.  Very few families can actually afford to pay the sticker price of tuition and need to go into debt just to finance college.  Most of the middle class jobs are now in fields that require degrees since the jobs are not growing in manufacturing (that is, making actual things):

-Food gets more expensive since you are also competing globally here.  Take a look at your grocery bill and compare it to your bill from 10 years ago.  This stands in stark contrast to household income that has been stagnant for over a decade.

We rarely hear about the massive decline in the US dollar in the mainstream press.  This is not likely to come up in any of the campaigns because the Fed and government realize they need to inflate our debt away.  Who in their right mind thinks we are ever going to pay off that growing $16 trillion debt?  The middle class in the US is a shrinking group.

Read the rest at My Budget 360