Originally published on Sep. 10, 2022 by TraderStef at CrushTheStreet
The underlying factor driving the liquidity crisis within a broad swath of financial markets is a significant U.S. dollar rally since the June 2021 low. The $DXY went vertical in March 2022 when the Federal Reserve began raising interest rates after Russia’s “special military operation” entry into Ukraine. I’ll dive into the liquidity issue, but first consider what late September may portend. The following video was recorded on Feb. 27 at the German Bundestag. The Leader of the Christian Democratic Union Friedrich Merz, delivered a speech on the commencement of hostilities in Ukraine and war in Europe. Listening to the full speech is unnecessary as the relevant quote for today is in the first minute. Merz’s demeanor is deliberate, he’s reading from his prewritten speech, and does not appear to confuse his date with Russia’s February entry into Ukraine.
“This 24th of September 2022, will be a day that will always stay in our memory. We can all say ‘where I was that day,’ after we first heard about the war and saw the first pictures of it.”
I have no foreknowledge of anything that’s slated to occur around Sep. 24. You’ll have to come to your own conclusion after chasing down publicly available information and a few dark rabbit holes. If forced to theorize with the rhetoric and coalescing of factors surrounding the conflict in Ukraine thus far, my immediate impulse is military related with a political twist that could heave the world into a deeper state of geopolitical chaos and economic recession.
Merz is a Freemason (from “Do Freemasons Worship Lucifer” book) and he commiserates with the Trilateral Commission, Council on Foreign Relations, and Bilderbergers just to name a few. Freemason’s and occultists must always announce in advance by code, sign, or plain language of planned events. Merz has done so if the September timeframe elicits a significant string of events. It may all be a coincidence or conjecture, but the geopolitical situation is primed for a winter of discontent no matter what happens at the end of this month. Sep. 24 is a date littered with history, but here are the relevant few:
- In 1946, the top-secret Clifford-Elsey Report (aka X Article) was delivered to President Truman, which introduced the term “containment” against the Soviet Union and subsequently expressed in the Truman Doctrine. It also predicted that U.S. alliances in Europe were destined to fail. That scenario would either lead to war between them or a joint attack against Russia.
- In 1996, representatives of 71 nations signed the Comprehensive Nuclear-Test-Ban Treaty (CTBT) at the United Nations.
- The Eastern Orthodox Church commemorate the Saints listed on Sep 11.
- 1:06 am is the equinox for fall 2022, and is also when Satanists hold a festival where human sacrifice is usually involved.
- Pope Francis has ordered that the Holy See and its international connected entities move all financial assets to the Vatican bank by Sep. 30.
Consider the following information that address the crises developing in Europe:
- Global Liquidity Crisis with Massive Food Shortages – Jim Rickards, Mar. 25
- Surge of Little Green Men, and Metal is Poised to Strike (thread) – TraderStef, Apr. 30
- Dark Age Winter of Discontent in Europe Part 1 & 2 – TraderStef, Aug. 31 & Sep. 6
- Ukraine’s military chief: ‘limited’ nuke war with Russia not ruled out – Insider, Sep.7
- Shock Waves Hit the Global Economy, Posing Grave Risk to Europe – NYT, Sep. 8
Let’s move on to the liquidity issue.
The indefinite shut down of natural gas flows via Nord Stream pipelines will likely trigger a recession in Germany and across Europe if winter weather remains normal, and especially severe if the continent experiences a stormier and much colder season. Natural gas inventory in Germany is at roughly 83% of capacity with imports from legacy exporters this year.
That storage will only last for two months of normal consumption during the winter. Without additional inflows from Russia, Germany is facing a sever shortfall even if this winter’s weather is normal. It’s estimated if the industrial sector, retail business, and consumer consumption of natural gas and electricity is rationed by 25% across the board, the country might get through a normal winter without additional inflows to storage.
It’s important to note that Germany is the largest economy in Europe and roughly 20% of its GDP depends on manufacturing. A 25% cut in energy availability may cause a partial and/or complete shutdown of some industrial activity, resulting in a 40% contraction of output. Germany’s economy will suffer from the supply and demand side as consumers reduce consumption and discretionary spending is further destroyed by inflation. Even with power industry bailouts and peasant subsidies via money printing, energy cannot be printed into existence and consumers will chase the fewer goods available and create another inflationary dynamic.
Almost every country in Europe is facing an energy shortage, extreme inflation that’s a shock to both producers and consumers, and is heading for recession as the cost of living crisis deepens. Goldman Sachs notes that European energy bills already increased 100% to 500% and estimates that reduced consumer spending may dampen GDP by roughly 15% going into 2023. Conservative estimates expect a contraction in overall economic activity of 2% – 3% GDP per quarter until mid-2023 or longer.
The global economy is intricately linked and financial crisis due to severe recessionary conditions in Europe would echo throughout the global financial system. Liquidity would quicky disappear with any hint that European banks were in distress. Capital has already flowed out of Europe and into the dollar over fears of a widening war with Ukraine on their eastern flank, and signs of a deepening economic crisis would only increase flows into the dollar.
$DXY – USD monthly chart as of Sep. 8, 2022 close…
As the dollar rises in value, many countries find it difficult and more expensive to repay their dollar-denominated debts, as they must exchange local currency and draw down central bank hard-currency reserves or assets. That dynamic depletes a safety valve for protecting a currency’s liquidity. Crippling debt increases the chance for economic collapse, as witnessed in Sri Lanka. Widspread civil unrest is likely a more common nightmare for bankers and politicos worldwide.
Aside from the fact that banks are facing increased debt-to-asset ratios the pandemic and dramatic increase in demand for credit as businesses struggled across the U.S. has dried up market liquidity. That’s one of the reasons why the CARES Act and Biden’s Covid relief package printed over $2 trillion in loans and grants for struggling businesses. Not only are current liquidity markets far below the amount of credit that businesses require after federal assistance ends, but there’s no guarantee that banks will be able to loan out the capital that’s available.
The shutdown of natural gas via the Nord Stream pipeline has thrown a big rusty wrench into Europe’s economies with wide-reaching global implications. Due to the high risk of a global recession and the wide range of unknown outcomes going into 2023, U.S. investors could experience severe losses in both equity and debt investments over the next year.
Keep a close eye on your investment porfolios and adjust accordingly.
Jim Rickards: Global Liquidity Crisis w/Massive Food Shortages – Stansberry Research, Mar. 25
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