Global stocks are falling precipitously once again, and banking stocks are leading the way. If this reminds you of 2008, it should, because that is precisely what we witnessed back then. Banking stocks collapsed as fear gripped the marketplace, and ultimately many large global banks had to be bailed out either directly or indirectly by their national governments as they failed one after another. The health of the banking system is absolutely paramount, because the flow of money is our economic lifeblood. When the flow of money tightens up during a credit crunch, the consequences can be rapid and dramatic just like we witnessed in 2008.
This is why North Korea’s test of an intercontinental ballistic missile is so important. North Korea had test fired a total of 22 missiles so far this year, but this latest one showed that nobody on the globe is out of their reach. In fact, General Mattis is now admitting that “North Korea can basically threaten everywhere in the world”, and that includes the entire continental United States. In addition to hitting individual cities with nukes, there is also the possibility that someday North Korea could try to take down the entire country with an EMP attack. If the North Koreans detonated a single nuclear warhead several hundred miles above the center of the country, it would destroy the power grid and fry electronics from coast to coast.
Italian voters have embraced the global trend of rejecting the established world order, but the “no” vote on Sunday has plunged global financial markets into a state of utter chaos. The euro has already fallen to a 20 month low, Italian government bonds are poised for a tremendous crash, and futures markets are indicating that both U.S. and European stock markets will be way down when they open on Monday. It is being projected that Italian Prime Minister Matteo Renzi’s referendum on constitutional reforms will be defeated by about 20 percentage points when all the votes have been counted, and Renzi has already announced that he plans to resign as a result. When new elections are held it looks like comedian Beppe Grillo’s Five-Star movement will come to power, and the European establishment is extremely alarmed at that prospect because Grillo wants to take Italy out of the eurozone. In the long run Italy would be much better off without the euro, but in the short-term the only thing propping up Italy’s failing banking system is support from Europe. Without that support, the 8th largest economy on the entire planet would already be in the midst of an unprecedented financial crisis.
The largest and most important bank in the largest and most important economy in Europe is imploding right in front of our eyes. Deutsche Bank is the 11th biggest bank on the entire planet, and due to the enormous exposure to derivatives that it has, it has been called “the world’s most dangerous bank“. Over the past year, I have repeatedly warned that Deutsche Bank is heading for disaster and is a likely candidate to be “the next Lehman Brothers”. If you would like to review, you can do so here, here and here. On September 16th, the Wall Street Journal reported that the U.S. Department of Justice wanted 14 billion dollars from Deutsche Bank to settle a case related to the mis-handling of mortgage-backed securities during the last financial crisis. As a result of that announcement, confidence in the bank has been greatly shaken, the stock price has fallen to record lows, and analysts are warning that Deutsche Bank may be facing a “liquidity event” unlike anything that we have seen since the collapse of Lehman Brothers back in 2008.
Have you seen what the price of silver has been doing? On Monday, it exploded past 20 dollars an ounce, and as I write this article it is sitting at $20.48. Earlier today it actually surged above 21 dollars an ounce for a short time before moving back just a bit. In late March, I told my readers that silver was “ridiculously undervalued” when it was sitting at $15.81 an ounce, and that call has turned out to be quite prescient. The Friday before last, silver started the day at $17.25 an ounce, and it is up more than 18 percent since that time. Overall, silver is up more than 30 percent for the year, and that makes it one of the best performing investments of 2016. So what is causing this sudden surge in the price of silver? This is something that we will discuss below…
The Italian banking system is a “leaning tower” that truly could completely collapse at literally any moment. And as Italy’s banks begin to go down like dominoes, it is going to set off financial panic all over Europe unlike anything we have ever seen before. I wrote about the troubles in Italy back in January, but since that time the crisis has escalated. At this point, Italian banking stocks have declined a whopping 28 percent since the beginning of 2016, and when you look at some of the biggest Italian banks the numbers become even more frightening. On Monday, shares of Monte dei Paschi were down 4.7 percent, and they have now plummeted 56 percent since the start of the year. Shares of Carige were down 8 percent, and they have now plunged a total of 58 percent since the start of the year. This is what a financial crisis looks like, and just like we are seeing in South America, the problems in Italy appear to be significantly accelerating.
The Italian financial meltdown that we have been waiting for has finally arrived. For quite a long time I have been warning my readers to watch Italy, and now people are starting to understand why. Italian banking stocks continued their collapse for a fifth consecutive day on Wednesday, and nervous Italians are beginning to quietly pull large amounts of money out of the banks. In particular, Monte dei Paschi is a complete and utter basket case at this point. A staggering one-third of their loans are “non-performing”, and the stock price has fallen a staggering 57 percent since 2016 began. Monte dei Paschi is going to need a major bailout, and the same thing could be said about almost all of the largest Italian banks. But where is the money going to come from?
IMF chief Christine Lagarde, one of the world's most powerful women, announced Wednesday she had been charged with "negligence" over a multi-million-euro graft case relating to her time as French finance minister. The shock announcement came a day after she was grilled for more than 15 hours by a special court in Paris that probes ministerial misconduct, the fourth time she has been questioned in a case that has long weighed upon her position as managing director of the International Monetary Fund. "The investigating commission of the court of justice of the French Republic has decided to place me under formal investigation," she said in exclusive comments to AFP.