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USD still in speculation to get stronger due to the even worse state the the EU is in...One thing that still defies all fundamentals: Why is the JPY still so damn strong? IMO, the massive interventions that the Japanese Reserve Bank did back in the days is coming to haunt them now...Its the US Feds' turn now to save Detroit and artificially inflate the JPY so that Toyota/Honda/etc would not appeal as much financially anymore to the global car buyers. As in theories, anything's possible in this current depression scenario we're mired in, so I surely cannot rule even the whackiest theory that anyone may have being wrong.
Dear Subscriber,
Fortunately for us, U.S. banks loaned only $500 billion to emerging markets over the past few years. Japanese banks loaned them less; only $200 billion.
But European banks loaned them a whopping $3.5 trillion — five times more than the U.S. and Japan combined. Amazingly, the loans to those countries were so large they're the equivalent of a whopping 21% of their Eurozone's total GDP, according to Bank for International Settlements. And when you look at individual countries, the numbers are even larger:
- In Sweden, banks loaned an amount equal to 25% of that country's GDP ...
- Swiss banks loaned the equivalent of 50% — fully HALF — of Switzerland's total GDP ...
- And Austrian banks loaned an amount equal to 85% that nation's GDP — with 80% going to the countries in Eastern Europe that are now suffering the greatest economic pain of all!
Now, these emerging markets are being squeezed mercilessly. Investors are fleeing. Credit is as rare as hens' teeth. Exports are slumping and income is vanishing. In fact, not one but TWO major crises are now hammering these emerging nations:
First, sinking exports. Over the last few years, the historic economic growth in emerging markets like Ukraine, South Korea, the Czech Republic, Poland, and others was driven almost entirely by demand for their exports from the U.S. and Europe.
Now, with the U.S. and Eurozone economies sliding, that demand has started to evaporate. And because these countries have little domestic demand to drive their economies, they've suddenly been thrown into a struggle for their very survival.
Second, plunging oil. As the economic crisis has slashed oil prices by nearly two-thirds, oil-producing emerging nations — Russia, Venezuela, Ecudor and others — are suddenly starving for cash to pay their bills.
Combined, these two events are now conspiring to set off a chain reaction that will bring the biggest creditors to these emerging markets — such as Europe and the UK — to their knees.
Tiny Ecuador: The Canary in the Coal Mine
When the history books are written, two key dates will be cited as moments when critical warnings were clearly telegraphed, duly recorded and promptly ignored until it was too late:
Key Date #1: Thursday, November 13. Nineteen days ago, the government of Ecuador failed to pay interest on bonds it had sold to investors. Citing plunging oil revenues, the government postponed its interest payments for a full month.
Key Date #2: Monday, December 15. Thirteen days from today, Ecuador must make those interest payments plus interest for the month of November. If it fails — if Ecuador defaults on its government bonds — it could be the first domino in a chain reaction of government debt defaults that will sweep the globe.
Is Ecuador a big player? Of course not. But it's merely the first one.
As you read this, governments throughout Asia and Europe are facing similar circumstances: Foreign demand for the products they produce is virtually non-existent ... their own citizens are unable to buy the products their factories produce ... and even oil producing nations are starving for cash as energy prices crater.
Russia is now begging China for a $25 billion loan to save its cash-strapped energy companies. Its foreign currency reserves have plunged $122.7 billion — a full 21% — in just 3 ½ months. Foreign investors are stampeding for the exits.
A few days ago, leaders from 21 nations, the International Monetary Fund (IMF) and three other international organizations attended an emergency, two-day summit to address the catastrophe among emerging nations. Japan pledged $100 billion for emergency loans to the governments of South Korea, India, Indonesia and other economies and urged other potential donor nations to do the same.
Now, as these once-emerging countries sink into depression, those loans are beginning to go sour. European banks are ALREADY getting hammered for huge loan losses — and investors who own their shares are ALREADY getting slammed. My forecast: You're going to see ...
- Huge loan defaults in emerging markets like Ecuador, Hungary, Ukraine, and Argentina ...
- Massive losses and even outright failures among Europe's largest banks ...
- Panic selling on stock exchanges throughout the Eurozone ...
- A massive flight to safety — OUT of euros ...
- Windfall profits for investors who know how to profit from the euro's plunge.