Extend-and-Pretend Caused Bankruptcies to Plunge in Germany, France, Spain. Now Central Banks Tell Banks to Prepare for Bankruptcy Surge

The “second wave,” if prolonged, could cause bad loans to almost triple, to €1.4 trillion, says the ECB. By Nick Corbishley, for WOLF STREET: German banks need to prepare themselves for a sharp spike in corporate bankruptcies early next year, the Bundesbank warned this week in its 2020 Financial Stability Review. It anticipates around 6,000 insolvencies in the first quarter of 2021. While this would be a little lower than at the peak quarter of the Global Financial Crisis, the Bundesbank cautioned that it “cannot rule out that … a lot more companies will go bankrupt than is currently expected.” Although Germany is in the grip of its worst economic contraction since World War 2, fewer insolvencies have been filed this year compared to 2019. This is the result of the weird bailout-and-stimulus economy, and includes these factors: Banks’ broad application of forbearance measures, which has given businesses extra financial leeway; The roll out of state-backed emergency loans and grants for struggling businesses, large and small, which forms the backbone of the country’s €1.3 trillion (so far) stimulus program; Germany’s “Kurzarbeit” social insurance program, which enables employers to reduce their employees’ working hours instead of laying them off, picking up government subsidies in the process. And most importantly, the temporary suspension of bankruptcy-declaration requirements. Helped along by these measures, the number of firms declaring insolvency in Germany fell 6.2% to 9,006 in the first half of this year from the same period last year, trending at their lowest level in 25 years, even as the economy shrinks at its fastest rate in over 70 years. Before the virus crisis, German companies that defaulted on their obligations and had piled up unsustainable debts had to file for insolvency. But that is no longer necessary — thanks to a new law introduced on March 1 that gave struggling companies extra breathing room. The law was supposed to expire on September 30, but, in classic extend-and-pretend fashion, its expiry date was postponed until the end of this year. This trend has been broadly replicated across much of Europe. In France, bankruptcies have been consistently falling on a year-by-year basis since 2015. And they’ve kept falling throughout the virus crisis. During the 12 months through July 2020, the number of insolvencies fell year on year by 28%, to 38,548, according to Banque de France. Even in sectors that bore the brunt of the crisis fallout, insolvencies have fallen sharply. Even the hard-hit travel and tourism sector saw a 28% fall in the 12 months through July. It’s a similar story in Spain, where insolvencies hit a six-year peak of 1,979 in the last quarter of 2019 — testament to the problems the Eurozone’s fourth largest economy was already grappling with before this year began. Since then, against the backdrop of Europe’s worst contraction yet, the number of insolvencies in Spain has done nothing but plunge, first by 13% year-on-year in the first quarter, and then by 30% year-on-year in the second quarter. For the moment, there is no official data for insolvencies in Italy, but probably much the same has happened. In all of these countries, struggling companies have hit the wall in fewer numbers than in recent years, and far fewer numbers and than would have been the case if it weren’t for all the government and central bank intervention. That intervention has merely postponed the huge economic pain. How many of the companies benefiting from government assistance, central bank liquidity, and new bankruptcy legislation were already in deep trouble before the pandemic and are in far deeper trouble now? In Germany most companies that were experiencing cash flow problems and unsustainable debt levels back in December, 2019, have effectively been given a new lease of life. And the number of zombie firms — over-leveraged, high-risk companies with a business model that is not self-sustaining — has soared. An estimated 550,000 firms — roughly one-sixth of the total — could already be classified as “zombies”, according to research by the credit agency Creditreform. In classic form, Berlin is thinking about further relaxing insolvency rules to forestall the wave of bankruptcies that the Bundesbank sees taking place early next year. Under the draft reform, the deadline for firms to file for insolvency would be extended to six from three weeks and authorities would apply more relaxed benchmarks when examining over-indebtedness. In France, concerns are also rising about the prospect of hordes of companies going under at the same time. The French Economic Observatory (OFCE) is calling on the government to step up the stimulus; otherwise, it says, bankruptcies may soar by as much as 80% in the coming months. That’s more or less in line with a forecast from S&P last week that European corporate default rates would more than double over the next nine months to 8.5% from 3.8%. In the worst-case scenario, where a second wave of the virus triggers new lockdowns, it said default rates in Europe could reach 11%. As virus infections are once again surging in Europe, restrictions on movement and activity are once again sprouting across the continent. Madrid is in a so-called “light lockdown” while Catalonia has shuttered all bars and restaurants. In France, the Macron government has declared a six-week nationwide curfew, which will hamper consumption and business activity, heaping even further pressure on struggling companies. Unlike most of their European peers, which had deleveraged somewhat since the 2008 crisis, French companies intensified their debt binge. By April, total corporate debt had reached €1.8 trillion, according to Banque de France (BdF) — the equivalent of 70% of GDP. In February, just as the virus crisis was getting going, corporate debt in France was already growing at an annualized rate of 5.8%. In March, the rate of growth jumped to 7.1%, and then 9.9 % in April. By July and August, it had surged to 12.8% and 13.2% respectively. While debt is still relatively cheap for large French firms, despite the bleak economic panorama, the risks facing excessively leveraged companies are mounting, BdF warned in its biannual financial risk report in June. That means the risks in the banking sector are also rising. Surging impaired loans once again threaten to wreak havoc on a continent where NPLs already represent 3.2% of the total loan books of the 121 biggest Eurozone banks. Andrea Enria, chair of the ECB’s supervisory board, told Handelsblatt this week that a prolonged second wave of the coronavirus pandemic could cause bad loans to almost triple, to €1.4 trillion. A gradual shift in anti-crisis policy appears to be taking place at the ECB. Rather than helping lenders forestall a huge wave of corporate bankruptcies, the ECB is now urging them to put viable businesses first as well as focus on their own financial health. The challenge is in deciding which businesses are viable essentially healthy firms that have temporarily hit hard times and which are true zombies. The Bundesbank has made similar noises in recent weeks, underscoring the importance that banks continue to do their job: to distinguish good from bad risks – and also to grant loans to good borrowers. So, too, have the Fed and the Bank of England. By Nick Corbishley, for WOLF STREET. What does it mean when Wall Street mega-landlords that bought the impaired assets after the last crash are trying to unload during the worst economic crisis on record? Read… Private-Equity Firm Blackstone, Spain’s Largest Landlord, Tries to Unload its Properties Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how: Would you like to be notified via email when WOLF STREET publishes a new article? 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Continue Reading Extend-and-Pretend Caused Bankruptcies to Plunge in Germany, France, Spain. Now Central Banks Tell Banks to Prepare for Bankruptcy Surge

CRYING WOLF: POWELL WON’T HELP TRUMP!

This article was contributed by Tom Beck of Portfolio Wealth Global.  Are you waiting for Jerome Powell to pull a RABBIT out of his HAT? There’s a presidential debate tentatively scheduled for the 29th, so don’t expect the central bank to MEDDLE in the MARKETS between now and then, since there’s absolutely no chance they want to be appearing to be TAKING SIDES. For the next few weeks, we have freer markets, so PRICE DISCOVERY will be real. The Federal Reserve won’t do much to offer artificial support. We saw a run to cash, but institutional money looks to be COMFORTABLE with buying the DIP at this point, with the S&P 500 in correction mode (-10%), on top of the NASDAQ 100. Courtesy: Zerohedge.com The global markets have GOTTEN USED TO government debt rising perpetually, so no one is TOO ALARMED by this, but when global GDP is at 252%, the REAL MEANING of it is that there are GUARANTEED VICTIMS in the sovereign restructuring in the years to come. Portfolio Wealth Global believes that both gold’s and silver’s PUKE yesterday shows that there’s BIG SUPPORT at the $1,900/ounce area, so we are eager to see if a NEW UPTREND is starting, after this BLOODBATH WEEK. The majority of people are vaccine-biased, which means that they won’t return to FULL CONFIDENCE until we “beat the corona.” Many industries are GOING BACK 5-10 years and even worse than that, in terms of demand for their products and services, facing massive default waves and I’m telling you that this is where BIG MONEY will be made. Hoteling, real estate, aviation, office space, healthcare – you name it and it’s in REBUILDING MODE. What are you doing to capitalize on this? Consumers, corporations, and governments need you to innovate and you can make a fortune on the way. Courtesy: Zerohedge.com EVERYONE is betting on technology, but the value is in the BEATEN-DOWN sectors. The markets have SHAKEN OUT the people who aren’t ready for volatility, but September isn’t over, nor is this SECOND WAVE scare. Personally, I follow our WATCHLISTS, which have come out in the past few months. The first is from late March and delivered HUGE RETURNS – click HERE! The second came out right before the June 8th peak – click HERE! The third came out JUST RECENTLY to address the September massacre – click HERE! Just a few days ago, when NASDAQ peaked, we published this (so timely) – click HERE! FEAR LEVELS are up; this is when contrarians act. We’re like nocturnal animals – we wait for everyone to sleep and then WE HUNT. I feel the same way about gold; this week’s dump to just over $1,900 took care of the LEVERAGED TRADERS. Courtesy: Zerohedge.com It’s LITERALLY IMPOSSIBLE to be looking at these charts and not allocate funds into precious metals. I ask people from the U.S., from Europe, from Central America, from Asia, and from Australia; the answer is the same: NO TRUST in government. Gold is essential and the fact remains that the uptrend is IN PLACE. President Trump is Breaking Down the Neck of the Federal Reserve! He wants zero rates and QE4! You must prepare for the financial reset We are running out of time Download the Ultimate Reset Guide Now!

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ROUND TWO IS HERE: BRACE FOR IMPACT!

This article was contributed by James Davis with Future Money Trends.  Some have been calling for a RETEST of MARCH LOWS, and I’m telling you that while Future Money Trends doesn’t see the indices going there AS A WHOLE, we are pretty certain that some companies, especially in COVID-19-SENSITIVE industries, are going to those levels ONCE MORE! Make sure you analyze our four WATCH LISTS published since March: 1, 2, 3, and TECH. What this SECOND SCARE of COVID-19 is guaranteeing is more social unrest, more riots, more division, and MUCH MORE media propaganda. It’s going to be EXTREMELY DISHEARTENING to see countries coming apart, democracies crumbling, friendships coming undone, corruption reigning supreme, and old ideas falling from a cliff, but the next three to four months WILL BE DISASTROUS. Don’t stoop to the level of general society; instead, help lift others upwards instead. Courtesy: Zerohedge.com I want to really DRIVE HOME the point of why rates can’t go higher. If anything, they’re probably HEADED DOWN even more. Sovereign debt is, in nominal terms, increasing to INDEFENSIBLE levels. Governments will never be able to keep paying down the principal and the interest, so they’re defaulting and are SOLELY FOCUSING on the interest servicing, which is easy with ZERO RATES and child’s play with NEGATIVE RATES. If a government can restructure MOST or ALL of its debt to zero and negative rates, they’ll also be able to issue very long-term bonds, going out 50 and 100 years. That’s one MAIN REASON why the central banks must continue monetizing the debt by suppressing bond yields down. The governments aren’t by themselves in this, solely thanks to zero rates. Corporations are RIDDEN WITH DEBT that can only be serviced in this environment. Should lenders decide that they just can’t accept these rates any longer, the DEFAULT TSUNAMI (across the board bankruptcies) that will ensue will be HISTORICAL. Courtesy: U.S. Global Investors As you can see, in September 2018, two years ago, when I mentioned that I’m buying gold personally, the price was $1,200/ounce and interest rates topped. Since then, THE TRANSITION to negative rates, which accelerated in June 2019, has brought HUGE REWARDS to us! Many doubt how rates could plummet further. True, they’re already -1%, so for them to sink BELOW THIS, either inflation ticks up or 10-year yields go lower, two scenarios that are HARD TO IMAGINE. Future Money Trends believes that inflation can rise by another +0.4%, while rates can lower by another -0.2%. In total, this represents a 50% move in real rates, from -1.00% to -1.50%, which doesn’t seem like much, but in GOLD TERMS, it represents a potential +25% upwards potential to $2,750/ounce. You can see a SNEAK PEEK of it below: Courtesy: U.S. Global Investors President Trump is Breaking Down the Neck of the Federal Reserve! He wants zero rates and QE4! You must prepare for the financial reset We are running out of time Download the Ultimate Reset Guide Now!

Continue Reading ROUND TWO IS HERE: BRACE FOR IMPACT!

Swamponomics: Ultra-Low Interest Rates Here to Stay, For a While

Please respect our republishing guidelines - Click Here It was a busy week for three of the world’s biggest central banks: the Federal Reserve, the Bank of England (BoE), and the Bank of Japan (BoJ). Despite these institutions presiding in three different continents, they showed their love for low interest rates. So, what happened during their September policy meetings? America, England, and Japan Walk into a Bar The U.S. central bank completed its two-day Federal Open Market Committee (FOMC) powwow, and the results were not too surprising. Fed Chair Jerome Powell and his merry band of central bankers agreed to keep its benchmark fed funds rate unchanged in the 0% to 0.25% target range. The Eccles Building revealed that it intends to leave rates where they are until 2023, or until inflation runs higher than the 2% target rate. It also modified its economic projections slightly higher: the Fed expects 4% GDP growth in 2021, 3% in 2022, and 2.5% in 2023. The most significant development from the meeting was its new inflation approach that would see the Fed allow inflation to rise without hiking rates to support the economic recovery. Yoshihide Suga Soon after Prime Minister Yoshihide Suga was elected by the National Diet to succeed Shinzo Abe, the BoJ convened its meeting. The central bank also left its benchmark rate the same at –0.1%, while maintaining its aggressive bond-buying program. Governor Haruhiko Kuroda and his associates said they would keep its 10-year government bond’s yield at 0%. The BoJ confirmed that it plans to coordinate with Suga on fiscal and monetary policy. Will the United Kingdom say pip, pip, cheerio to above-zero interest rates? The nine-member Monetary Policy Committee voted to maintain its historically low rate of 0.1%. But the minutes were the real headliner from the meeting as the institution noted that it is looking into “the effectiveness of negative policy rates.” It has long been speculated that the BoE would adopt subzero rates, something that the central bank routinely downplayed. Now it looks like the NIRP is coming. So, Britons, keep a stiff upper lip and all that. Could the U.S. become the next nation to institute a NIRP? The Fed has said that it does not plan to bring rates below zero, but if it fails to resuscitate the economy and maintain the impressive stock market recovery, it may have no other choice but to fire this unconventional weapon. It is comparable to buying stocks. The central bank has been scooping up corporate bonds, so why would it refrain from acquiring shares in Apple, Walmart, or General Electric, should the equities arena tank? Is Soybean the Comeback Kid? What an impressive few years it has been for U.S. soybeans. While prices are still below their record high of $17.43 a bushel from 2012, they have topped $10 for the first time since 2018. The crop had been one of the casualties in President Donald Trump’s trade war with China. Still, it has also been one of the chief beneficiaries of his phase one deal with Beijing as the world’s second-largest economy enhances its purchases of the agricultural commodity. How much longer can this bull run survive? That might depend on Brazil and China. The former has seen its harvest surge to record highs this past summer, and the latter is continuing to boost demand to add to its domestic inventories. Argentina may play a factor, while foreign exchange rates will also linger in the background. Whatever the case, this is good news for American growers since they can take advantage of higher prices, a weaker U.S. dollar, and government subsidies. IPO Like It’s 1999, Baby! Do you even IPO, bro? The initial public offering market is booming, despite the U.S. economy in the middle of a pandemic and uncertainty in the broader financial market. Nothing seems to be stopping the IPO industry from partying like it is 1999. Snowflake, a cloud-based database platform, had a monumental opening, raising close to $4 billion before selling a single stake to Salesforce and Berkshire Hathaway. It was a wild ride. The company initially proposed a price range of $75 to $85 per share, but then raised it to around $100. The shares were finally offered for $120. The stock then opened at more than $200 during the September 16 trading session. Shares slumped nearly 20% since. Still, this was the largest valuation of a firm to double its price in a market debut. When Warren Buffett gets in on the IPO frenzy, you pay attention. JFrog Ltd., a service that allows businesses to release their software upgrades to all their users and employees quickly, had a similar story. JFrog shares debuted at $77 before falling 10% by the end of the September 17 session. Indeed, there are many similarities between the IPO mania of the 1990s and today. Simultaneously, there are still plenty of differences to potentially lend credence to the popular Wall Street phrase: “It’s different this time.” The chief fact is that today’s tech firms have a lot more revenues than young internet companies during the dot-com bubble. They might not be profitable, which is prevalent in the IPO market, but they generate revenues. That said, with cheap money laying around like face masks littering city streets, courtesy of the Fed, it is more than likely that the IPO mania will expand for the remainder of 2020 and into next year. What are you going to do? Buy a low-yielding Treasury? You have no choice if you want to grow your money. ~ Read more from Andrew Moran.

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The Federal Reserve Is “Fighting the LAST BATTLE!”

Mac SlavoSeptember 16th, 2020SHTFplan.com The central bank of the United States, the same one that creates dollars out of thin air, is “fighting the last battle.” Things are going to get a lot worse, and it’s all by design. The goal is a full control centralized dollar and dependence on the system for a universal basic income. In other words, complete slavery is the ultimate final goal of the New World Order. The central banks are in control right now, the dollar is collapsing, and this is all being done on purpose. The Fed won’t be changing anything dramatically with regards to their monetary policy, and if you already know what the end game is, you know this.  The “last battle” they are fighting now is for ultimate control over every single transaction of all human beings. Interest rates will be allowed to drop even further and the dollar will be destroyed all while Americans continue to struggle to put food on the table and the corporations get ridiculously wealthy. Last night, Greg Mannarino uploaded his “Market Wrap Up” and tried to remind those listening of what is really going on.  “They are on a mission to own it all,” says Mannarino of the Fed’s ultimate plans. “They’re gonna buy more debt, they’re gonna issue more debt, and they’re gonna melt the dollar…nothing is gonna change here. The goal of these central banks is to inflate massively. Debts and deficits are going to balloon.” Mannarino continued, saying:  “It’s pretty obvious and it should be to anyone that things are going to get monumentally worse by design...it’s all a scam. This entire thing is a charade, it’s fake.” The United States alone has Great Depression levels of unemployment, half (or more) of small businesses are gone for good, never to return, meanwhile, Wall Street executives are ettin the biggest bonuses in history this year. Let that sink in. There is no recovery. There was never meant to be. President Trump is Breaking Down the Neck of the Federal Reserve! He wants zero rates and QE4! You must prepare for the financial reset We are running out of time Download the Ultimate Reset Guide Now! Author: Mac SlavoViews:Date: September 16th, 2020Website: www.SHTFplan.com Copyright Information: Copyright SHTFplan and Mac Slavo. This content may be freely reproduced in full or in part in digital form with full attribution to the author and a link to www.shtfplan.com. Please contact us for permission to reproduce this content in other media formats. SHTFPLAN is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

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Fw: Is the GREATEST CRASH Ever COMING?

This article was contributed by James Davis with Future Money Trends.  In 2008, when the markets plunged by 47%, central banks and the government HAD A CHOICE: allow debts and companies to run the normal course of bankruptcy or INFLATE AWAY by intervening in the process. The decision to bail out the financial system’s most powerful corporations, which were the banks, PAVED THE WAY for the unprecedented COVID-19 response and the way interest rates operate globally in 2020. The Federal Reserve is an institution that COLLECTS DATA from innumerable sources and makes analytical decisions based on its lawful mandate and risk tolerance. Failure to act in the Great Depression of 1929 has played a major role in the thought processes of FED chairmen over the decades. A lack of adequate response in 1929 is what historians blame the central bank for. When there’s a monetary system that pegs gold ounces to the supply of government currency, public trust is measured by their ability to convert notes to precious metals. When there’s a STRICTLY CREDIT system in place, as we have right now, gold is marginalized in the eyes of the public. Only 0.5% of global wealth is held in gold; most don’t care to learn about it and some EVEN SCORN it as a thing of the past, yet it is trading near all-time highs and has been a TOP-TIER performer in the 21st century. In our opinion, gold is becoming LESS VOLATILE and more of a MUST-OWN asset since the ETFs have made it a thing of comfort to have exposure to. In my networking group, which I highly respect, we had the following question raised in light of the comparisons made by the CHART BELOW between 2020 and 1929: Courtesy: Zerohedge.com The question: Is the GREATEST CRASH on record coming? We’ve gathered answers from billionaires and money managers who are MARKET VETERANS, along with large hedge fund managers. The result? NO MARKET CRASH is predicted! I want to go over the reasons behind this since many feel like THE EARTH IS SHAKING beneath them and they’ve been living under that premise for years! The Internet is FILLED WITH forecasts of doom, -80% wealth destructions and the worst economic conditions in modern history, all based on the chart below of the UNSUSTAINABLE NATIONAL DEBT. Courtesy: Zerohedge.com Many people can’t sleep at night, worrying about the DEBT LOAD of the federal government, so I’d like to DECONSTRUCT this threat and bring it down to the level of the individual. The United States’ GDP isn’t growing as fast as its debts are, so the ratio between productivity and debt issuance is GETTING SMALLER, which is to say that it is unsustainable. Is there a connection between this and the markets? NOT REALLY… As you can see, total debt is ALWAYS GROWING (since 1971, that is), and even the feared DEBT/GDP ratio is growing along with it, yet because of zero interest rates, it’s actually VERY EASY to pay the interest on the debt, which is what the government does. On top of that, many of the LARGEST EXPENSES are social entitlements, so it can be argued that cutting back on those will MATERIALLY EASE the debt burden, though I can’t say that there’s political will to entice the baby boomers just yet. The bottom line is that (1) companies are innovating LEFT AND RIGHT, which is what is moving the world forward, and (2) interest rates are so low that owning equities is ONE’S ONLY CHOICE! Instead of thinking of a market crash, think about the RECORD-HIGH wealth gap! This is really what the world has to fear because it drives social unrest and PERPETUATES POVERTY. The fact that there is NO CRASH is what makes poverty linger; the people at the bottom of the food chain don’t get to capitalize on the wealthy’s mistakes. President Trump is Breaking Down the Neck of the Federal Reserve! He wants zero rates and QE4! You must prepare for the financial reset We are running out of time Download the Ultimate Reset Guide Now!

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If You Feel Like Something Really, Really Bad Is About To Happen, You Are Definitely Not Alone

Continue Reading If You Feel Like Something Really, Really Bad Is About To Happen, You Are Definitely Not Alone

CNN: “The Rioting Has To Stop” But Only Because It Will Hurt Joe Biden

Continue Reading CNN: “The Rioting Has To Stop” But Only Because It Will Hurt Joe Biden

PULVERIZED: Cash Malfunctioned – BRACE FOR IMPACT!

Continue Reading PULVERIZED: Cash Malfunctioned – BRACE FOR IMPACT!

Robert Kiyosaki: American Is Headed For Totalitarianism

Continue Reading Robert Kiyosaki: American Is Headed For Totalitarianism