Why Are The IMF, The UN, The BIS And Citibank All Warning That An Economic Crisis Could Be Imminent?

By Michael Snyder, the Economic Collapse Blog.

Question Sign Red - Public DomainThe warnings are getting louder.  Is anybody listening?  For months, I have been documenting on my website how the global financial system is absolutely primed for a crisis, and now some of the most important financial institutions in the entire world are warning about the exact same thing.  For example, this week I was stunned to see that the Telegraph had published an article with the following ominous headline: “$3 trillion corporate credit crunch looms as debtors face day of reckoning, says IMF“.  And actually what we are heading for would more accurately be described as a “credit freeze” or a “credit panic”, but a “credit crunch” will definitely work for now.  The IMF is warning that the “dangerous over-leveraging” that we have been witnessing “threatens to unleash a wave of defaults” all across the globe…

Governments and central banks risk tipping the world into a fresh financial crisis, the International Monetary Fund has warned, as it called time on a corporate debt binge in the developing world.

Emerging market companies have “over-borrowed” by $3 trillion in the last decade, reflecting a quadrupling of private sector debt between 2004 and 2014, found the IMF’s Global Financial Stability Report.

This dangerous over-leveraging now threatens to unleash a wave of defaults that will imperil an already weak global economy, said stark findings from the IMF’s twice yearly report.

The IMF is actually telling the truth in this instance.  We are in the midst of the greatest debt bubble the world has ever seen, and it is a monumental threat to the global financial system.

But even though we know about this threat, that doesn’t mean that we can do anything about it at this point or stop what is about to happen.

The Bank of England, the UN and the Bank for International Settlements have all issued similar ominous warnings.  The following is an excerpt from a recent article in the Guardian

The IMF’s warning echoes a chorus of others. The Bank of England’s chief economist, Andy Haldane, has argued that the world is entering the latest episode of a “three-part crisis trilogy”. Unctad, the UN’s trade and development arm, would like to see advanced economies boost public spending to offset the downturn in emerging economies. The Bank for International Settlements believes interest rates have been too low for too long, encouraging too much risk-taking in financial markets. All of them fear that the global financial system is primed for a crisis.

I particularly like Andy Haldane’s likening our current situation to a “three-part crisis trilogy”.  I think that is perfect.  And if you are familiar with movie trilogies, then you know that the last episode is usually the biggest and the baddest.

Citigroup economist Willem Buiter also believes that big trouble is on the horizon.  In fact, he is publicly warning of a “global recession” in 2016

Citigroup economist Willem Buiter looks at the world landscape and sees an economy performing substantially below potential output, which he uses as the general benchmark for the idea of a global recession. With that in mind, he said the chances of a global recession in 2016 are growing.

“We think that the evidence suggests that the global output gap is negative and that the global economy is currently growing at a rate below global potential growth. The (negative) output gap is therefore widening,” Buiter said in a note to clients. He added, “from an output gap that was probably quite close to zero fairly recently, continued sub-par global growth is likely to put the global economy back into recession, if indeed the world ever fully emerged of the recession caused by the global financial crisis.”

Usually when we are plunged into a new crisis there is some sort of “trigger event” that creates widespread panic.  Yesterday, I wrote about the ongoing problems at commodity giants such as Glencore, Trafigura and The Noble Group.  The collapse of any of them could potentially be a new “Lehman Brothers moment”.

But something else happened just yesterday that is also extremely concerning.  Just a couple of weeks ago, I warned that the biggest bank in Germany, Deutsche Bank, was on the verge of massive trouble.  Well, on Wednesday the bank announced a loss of more than 6 billion dollars for the third quarter of 2015

Deutsche Bank’s new boss John Cryan set about cleaning up Germany’s biggest bank on Thursday, revealing a record pre-tax loss of 6 billion euros ($6.7 billion) in the third quarter and warning investors of a possible dividend cut.

Write downs, impairments and litigation costs all contributed to the loss, the bank said.

Cryan became chief executive in July with a promise to cut costs. The Briton is accelerating plans to shed assets and exit countries to shrink the bank and is preparing to ax about 23,000 jobs, or a quarter of the bank’s staff, sources told Reuters last month.

Keep an eye on Germany – the problems there are just beginning.

Something else that I am closely watching is the fact that major exporting nations such as China that used to buy up lots of U.S. government debt are now dumping that debt at an unprecedented pace.  The following comes from Wolf Richter

Five large purchasers of US Treasuries – China, Russia, Norway, Brazil, and Taiwan – have changed their minds. They’re dumping Treasuries, each for their own reasons that are now coinciding. And at the fastest rate on record.

For the 12-month period ended July, sales of Treasuries by central banks around the world reached a net of $123 billion, “the biggest decline since data started to be collected in 1978,” the Wall Street Journal reported.

China, the largest foreign owner of Treasuries – its hoard peaking at $1.317 trillion in November 2013 – has been unloading with particular passion. By July, the latest data available from the US Treasury Department, China’s pile was down to $1.241 trillion.

Yes, I know, the stock market went up once again on Thursday, and all of the irrational optimists are once again telling us that everything is going to be just fine.

The truth, of course, is that everything is not going to be just fine.  Ever since I started the Economic Collapse Blog, I have never wavered in my belief that the greatest economic crisis that the United States has ever seen is coming, and I have written well over 1000 articles setting forth the case for the coming collapse in excruciating detail.  Nobody is going to be able to say that I didn’t try to warn them.

Those that have blind faith in Barack Obama, Wall Street, the Federal Reserve and the other major central banks around the planet will continue to mock the idea that a major collapse is coming for as long as they can.

But when the day of reckoning does arrive and crisis coming knocking at their doors, what will they do then?

This entry was posted in Business / Economics, Politics / World News. Bookmark the permalink.
  • jadan

    “…I have never wavered in my belief that the greatest economic crisis that the United States has ever seen is coming….” Snyder is not objective and he’s making this as plain as he can. When he castigates others for “blind faith” in business-as-usual and the powers-that-be, don’t overlook the fact of his own blind faith in the catastrophic scenario that is his prophetic vision. He’s an Old Testament prophet serving his God. We are about to be judged.

    This message resonates in our Christian culture because Christianity is an apocalyptic religion at its core. God is displeased when His laws are broken and He sends down destruction in retaliation. Doesn’t matter how foolish and infantile this idea seems, it is a major belief in our time, and there are lots of chuckleheads in Congress who see the future in just this way.

    There is also the secular version of this religious apocalypse: the climate change crowd. They foresee a planetary catastrophe not because we accept abortion and gay marriage, but because we have produced too much CO2 and disrupted our climate. Our way of life is not sustainable as a result, not because God is going to punish us but because we are abusing the natural system that makes our life possible.

    Religious or secular, we’re looking at profound anxiety about the future. There is an expectation of disaster. The religious expect that the disaster will also bring the return of the Messiah, JC and his legions; the secular do not have this consolation. We’ll go back to the stone age and start over.

    Life as we know it is not sustainable, whether because we kill fetuses or because our cows fart too exuberantly and we burn fossil fuels. The anxiety is there and everyone feels it in their bones, provided they are not masking it with drugs. Everybody all over the planet feels this nagging anxiety about the future.

    We’re not dealing with it. We’re not being proactive.

    • animalogic

      Thank you Mr Synder. I dont believe you are “old testement”, religous, or any other conveniennt metaphor. I believe you are more or less correct: after 30 odd years of criminal greed and incompentence by political/economic elites the world is on increasingly THIN ICE( sorry…a figure of speech). Of course, there will always be people wanting to look up your arse and tell you your hat is not on straight….such is life….

      • jadan

        Snyder’s analysis is fairly compelling. The ice is very thin! And I must admit that like Snyder, I have had an unwavering conviction about a disastrous future my entire life, though it is not based on the ravings of John of Patmos. Religion can be right now and then, but usually for the wrong reasons. Have a look at this essay:


        You will find that Snyder is playing the tole of Old Testament prophet if you go over the essays on this site. The financial catastrophe he’s pointing to is not mismanagement and greed alone, it is judgment from the same God that turned Lot’s wife to a pillar of salt.

        “Of course, there will always be people wanting to look up your arse and tell you your hat is not on straight….such is life….” Great metaphor!

  • bertof

    why are they warning, because they need to monetize more debt, and its 45 trillion us dollar denominated debt world wide that is about to mature in the coming 16 months . the wave of defaults is going to be huge, 2008 all over- central banks to the rescue- this will be known as RINSE and REPEAT for all you collapsatarians . CENTRAL BANKS are in total control and we allow it to be

  • an empathic person

    Were so screwed.