We live in
a world that is becoming increasingly unstable, and the potential
for an event that could cause "sudden change" to the U.S. economy
is greater than ever. There are dozens of potentially massive threats
that could easily push the U.S. economy over the edge during the
next 12 months. A war in the Middle East, a financial collapse in
Europe, a major derivatives crisis or a horrific natural disaster
could all change our economic situation very rapidly. Most of the
time I write about the long-term
economic trends that are slowly but surely ripping the U.S.
economy to pieces, but the truth is that just a single really bad
"black
swan event" over the next 12 months could accelerate our economic
problems dramatically. If oil was cut off from the Middle East or
a really bad natural disaster suddenly destroyed a major U.S. city,
the U.S. economy would be thrown into a state of chaos. Considering
how bad the U.S. economy is
currently performing, it would be easy to see how a major "shock
to the system" could push us into the "next Great Depression" very
easily. Let us hope that none of these things actually happen over
the next 12 months, but let us also understand that we live in a
world that has become extremely chaotic and extremely unstable.
In the list
below, you will find some "sudden change" events that are somewhat
likely and some that are quite unlikely. I have tried to include
a broad range of potential "black swan events", but there are certainly
dozens more massive threats that could potentially be listed.
The following
are 15 potentially massive threats to the U.S. economy over the
next 12 months....
#1
War With Syria – U.S. Senator John McCain is now publicly
calling for U.S. airstrikes against Syria. A military conflict
with Syria becomes more likely with each passing day.
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#2
War With Iran – A war in the Middle East involving
Iran could literally erupt at any time. The following is from a
Reuters news report that was issued on
Monday....
President Barack Obama appealed to Benjamin Netanyahu on Monday to give sanctions time to curb Iran's nuclear ambitions, but the Israeli prime minister offered no sign of backing away from possible military action, saying his country must be the "master of its fate."
#3
A Disorderly Greek Debt Default – Many reporters in Europe
seem to think that this is becoming increasingly
likely. So what would a disorderly Greek debt default mean for
the global financial system? A leaked report that was authored by
the Institute of International Finance says that a disorderly Greek
debt default would have some very serious consequences. You
can read the full text of that leaked report right
here.
#4
An Economic Collapse In Spain – Spain has one of the largest
economies in Europe and it is rapidly becoming a basket case. As
I have written about previously,
the unemployment rate in Spain has hit 19.9 percent, and the unemployment
rate for workers under the age of 25 is up to 49.9 percent. Unfortunately,
the situation in Spain continues to deteriorate. The following is
from a recent article by
Marc Chandler....
However, the devolution in Spain is particularly troubling. The new fiscal compact had just been signed last week, which includes somewhat more rigorous fiscal rule and enforcement, when Spain's PM Rajoy revealed that this year's deficit would come in around 5.8 percent of GDP rather the 4.4 percent target. This of course follows last year's 8.5 percent overshoot of the 6 percent target.
The problem that for Spain is that the 4.4 percent target was based on forecasts for more than 2 percent growth this year. However, in late February, the EU cuts its forecast to a 1 percent contraction. This still seems optimistic. The IMF forecasts a 1.7 percent contraction, which the Spanish government now accepts.
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#5
The Price Of Gasoline – The average price of a gallon
of gasoline in the United States has risen for 27
days in a row and is now up to $3.77. Virtually all forms of
economic activity are affected by the price of gasoline, and if
the price of gas keeps going up it is eventually going to have dramatic
consequences for the U.S. economy.
#6
The Student Loan Debt Bubble – Just like we saw with the
housing bubble, the student loan debt bubble just continues to grow
and grow and grow. At some point the nearly
1 trillion dollar bubble is going to burst. What effect will
it have on our financial system when that finally happens?
#7
State And Local Government Debt Crisis – It is being reported
that California is running
out of cash again and there are cities all over the country
that are on
the verge of bankruptcy. Could we see a significant municipal
bond crisis in the next 12 months?
#8
The Collapse Of A Major U.S. Bank – A number of top U.S.
banks are looking increasingly shaky. In a recent
article, David Trainer explained why he has such serious concerns
about Bank of America right now....
In my opinion, there are four actions taken by financial services that signal the company is headed to serious trouble.
1. Management shake-up and major layoffs – lots of layoffs over the past year
2. Exploiting accounting rules to boost earnings – SFAS 159
3. Drawing down reserves to boost earnings: to the tune of $13.3 billion in 2011 and 2012
4. Bilking customers with new fees: tried it before and trying it again
Bank of America has taken all four steps.
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#9
A Derivatives Crisis – The International Swaps and
Derivatives Association recently ruled that the Greek debt deal
will not trigger payouts on credit default swaps. This is seriously
shaking confidence in the global market for derivatives. But
the global financial system simply cannot afford a major derivatives
crisis.
Estimates of
the notional value of the worldwide derivatives market range from
$600 trillion all the way up to $1.5 quadrillion. The notional value
of all derivatives held by Bank of America is approximately $75
trillion. JPMorgan Chase is holding derivatives with a notional
value of approximately $79
trillion.
When the derivatives
bubble finally bursts it is going to be a financial horror show
unlike anything we have ever seen.
#10
The Fall Of The Japanese Economy – The Japanese economy
shrank at
a 2.3 percent rate during the fourth quarter of 2011. Japan
has a debt to GDP ratio of over 200 percent and a major debt crisis
involving Japan could erupt at any time.
#11
A "Solar Megastorm" – Scientists tell us that there is
a "1
in 8 chance" that a "solar megastorm" will hit the earth by
2014. A recent Daily
Mail article detailed what some of the consequences of such
an event would be....
'We live in a cyber cocoon enveloping the Earth. Imagine what the consequences might be,' Daniel Baker, of the University of Colorado's Laboratory for Atmospheric and Space Physics told National Geographic when asked about a potential 'megastorm'.
'Every time you purchase a gallon of gas with your credit card, that's a satellite transaction.
'Imagine large cities without power for a week, a month, or a year. The losses could be $1 to $2 trillion, and the effects could be felt for years.
#12
A Major West Coast Earthquake Or Volcanic Eruption –
On Monday, there was a 4.0
earthquake in San Francisco and a 6.1
earthquake in Argentina. Is the "Ring of Fire" waking up again?
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#13
Tornado Damage To Major U.S. Cities – Last year, the
U.S. experienced one of the worst
tornado seasons of all time. This year, we have already seen
the worst tornado outbreak ever recorded in the United States in
the month of March. A couple of towns in Indiana were
completely wiped out by that outbreak. So what should we expect
when we get to the heart of tornado season this year?
#14
Severe Drought In The United States – Last summer was one
of the driest summers on record in the United States, and in many
areas there is simply not
enough water available for farmers this year. Some are even
projecting that we could see "dust
bowl conditions" return to some areas of the country eventually.
#15
An Asteroid Strike In 2013 – Although scientists tell us
that the probability is extremely low, the truth is that there is
a slight chance that a sizeable asteroid could hit the earth in
February 2013. The asteroid is estimated to be between 60 and 100
meters wide, and it is projected to pass by our planet "at
a distance of under 27,000 km". If it did hit us (and scientists
say that the odds of that happening are very low) it would potentially
be as serious an event as the Tunguska Event in Siberia in 1908.
Mac Slavo of
shtfplan.com recently described how awesome the Tunguska Event
really was....
On June 30, 1908 an incoming meteor exploded approximately 5 miles above Siberia. The force of the air burst explosion, estimated at between 15 and 30 megatons, or about 1000 times bigger than the atomic bomb that destroyed Hiroshima, was so powerful that it annihilated everything in an 830 square mile area, and reports suggest that that explosion was heard up to 1000 miles away. Because of the remoteness of the impact zone, the Tunguska Event over Siberia had very little effect on the human population in the region, but the destruction of some 80 million trees in the area shows just how powerful a blast was created.
Of course there
are so many other "sudden change" events that could potentially
happen – a terror event in a major U.S. city, a deadly pandemic,
an EMP attack, cyberterrorism or a major political scandal could
all possibly cause a stock market crash and an economic collapse
in the United States.
In the world
that we are living in today, you just never know what is going to
happen.
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