The financial crisis in Europe is real. Were you aware that just a several of days ago that Spain's largest bank failed in a very spectacular fashion? Many are comparing Banco Popular's sudden implosion with the Lehman Brothers collapse in 2008. To avoid a large-scale financial panic, EU regulators have hastily arranged to sell Santander the failed bank.
Unfortunately, a majority of Americans have no clue that there is a new financial crisis beginning over in Europe since most Americans are only focused on what is happening in their own country. However, we should all be paying close attention, since the EU is the world's second largest economy, and the euro is the second most widely used currency in the world. The U.S. financial system is on the brink of disaster already, and this new European financial emergency could end up pushing us over the edge.
The financial crisis would have happened if the "forced sale" of Banco Popular" over to Santander's hand not been arranged by the EU regulators. The most likely we would be seeing panic on a wider scale in Europe right now that hasn't been seen since 2008.
On Thursday (June 8, 2017), Liberbank shares dropped an astonishing 20 percent, which was followed up by an additional 19 percent drop on Friday.
The response from Spanish authorities was to ban short sales on Liberbank shares. This resulted in the stock price seeing a short-term rebound. However, this type of chaos has not been seen in European financial markets in quite some time.
In the meantime, Nick Giambruno is warning of a much larger bubble. Right now, over a trillion dollars in Italian government bonds currently have negative yields.
The party will all be over the minute the ECB stops wildly purchasing Italian bonds, Italy's financial system will come crashing down. Unfortunately for the Italians, the ECB is being pressured by the Germans to stop printing so money. Usually, the Germans do get their ways with these types of things.
The last time there was this dramatic of a deceleration of global credit growth, there was an intervention by global central banks on a scale that had not previously been seen.
All of this is occurring within the context of the global economy that seems to be headed straight for a significant downturn. It is unclear what will jump start the next credit impulse spike. What is clear is if the 3 to 6 month lag between impulse or credit inflection points and economic growth occurs as we traditionally have seen, then the global economy is poised for a massive collapse sometime within the second half of that time frame.
We have not seen this type of climate since 2008-2009, and everything is pointing towards this financial crisis accelerating as we enter into the second half of 2017.
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