17 Reasons To Be Extremely Concerned About The Second Half Of 2012Michael Snyder, Contributor Black Monday happened on October 19th, 1987. The financial crisis of 2008 started in the fall. There just seems to be something about the fall that brings out the worst in the financial markets. But of course there is not a stock market crash every year. So are there specific reasons why we should be extremely concerned about what is coming this year? Yes, there are. #1 Historical Trends A recent IMF research paper by Luc Laeven and Fabin Valencia showed that a banking crisis is far more likely to start in September than in any other month. The following chart is from their report. #3 Derivatives Citigroups two-notch long-term rating downgrade from A3 to Baa2 could have led to US$500m in additional liquidity and funding demands due to derivative triggers and exchange margin requirements, according to the banks 10Q regulatory filing at the end of the first quarter. Morgan Stanley which Moodys downgraded from A2 to Baa1 said a two-notch downgrade from both Moodys and Standard and Poors could spur an additional US$6.8bn of collateral requirements in its latest 10Q. The bank did not break down its potential collateral calls under a scenario where only Moodys downgraded the bank below the Single A threshold. Royal Bank of Scotland estimated it may have to post 9bn of collateral as a result of the one-notch Moodys downgrade to Baa1 in a statement on June 21, but did not detail how much of this additional requirement was driven by margin for swaps exposures. The worldwide derivatives market is starting to show some cracks, and at some point this is going to become a major disaster. Remember, the 9 largest U.S. banks have a total of more than 200 trillion dollars of exposure to derivatives. When this bubble completely bursts it is going to be impossible to fix. #4 LEAP/E2020 Warning The shock of the autumn 2008 will seem like a small summer storm compared to what will affect planet in several months. In fact LEAP/E2020 has never seen the chronological convergence of such a series of explosive and so fundamental factors (economy, finances, geopolitical) since 2006, the start of its work on the global systemic crisis. Logically, in our modest attempt to regularly publish a crisis weather forecast, we must therefore give our readers a Red Alert because the upcoming events which are readying themselves to shake the world system next September/ October belong to this category. #5 Increasing Pessimism #6 Spain According to CNBC, Spains short-term borrowing costs are now about three times higher than they were just one month ago. Spains short-term borrowing costs nearly tripled at auction on Tuesday, underlining the countrys precarious finances as it struggles against recession and juggles with a debt crisis among its newly downgraded banks. The yield paid on a 3-month bill was 2.362 percent, up from just 0.846 percent a month ago. For six-month paper, it leapt to 3.237 percent from 1.737 percent in May. Needless to say, this is very, very bad news. #7 Italy The euro zones third-biggest economy is seen as the next domino at risk of toppling after the European Unions June 9 deal to lend Spain $125 billion in bank bailout funds. Yields on Italys 10-year government bonds reached 6.2 percent on June 13, up from just 4.8 percent in March. By pushing up Italys borrowing costs out of fear of default, investors are making a default more likely. A recent Fortune article detailed some of the economic fundamentals that have so many economists deeply concerned about the Italian economy right now. The main glaring risk threats that could propel Italy down the path to become Europes next domino is the size of countrys outstanding debt (at 1.9 trillion or 120% of GDP); the mountain of debt it has to roll over in the next 12 months (nearly 400 billion); and the markets cracking credibility around Prime Minister Mario Montis ability to reduce the countrys fiscal footprint and spur growth. Further, fear around Italys creditworthiness, which has recently been expressed by near cycle highs in sovereign CDS spreads and government yields on the 10-year bond, follow some rather glaring negative fundamentals over recent quarters and years: declining GDP over the last three consecutive quarters; a rising unemployment rate (especially among its youth); deterioration in labor market competitiveness; and increased competition for export goods to its key trading partners. #8 Greece #9 Cyprus #10 Germany Merkel, speaking to a conference in Berlin today as Spain announced it would formally seek aid for its banks, dismissed euro bonds, euro bills and European deposit insurance with joint liability and much more as economically wrong and counterproductive, saying that they ran against the German constitution. Its not a bold prediction to say that in Brussels most eyes all eyes will be on Germany yet again, Merkel said. I say quite openly: when I think of the summit on Thursday Im concerned that once again the discussion will be far too much about all kinds of ideas for joint liability and far too little about improved oversight and structural measures. In fact, Merkel says that there will be no eurobonds as long as I live. This means that there will be no quick fix for the problems that are unfolding in Europe. #11 Bank Runs In a previous article I included an extremely alarming quote from a CNBC article about the unfolding banking crisis in Europe. Financial advisers and private bankers whose clients have accounts too large to be covered by a Europe-wide guarantee on deposits up to 100,000 euros ($125,000), are reporting a bank run by wire transfer that has picked up during May. Much of this money has headed north to banks in London, Frankfurt and Geneva, financial advisers say. Its been an ongoing process but it certainly picked up pace a couple of weeks ago We believe there is a continuous 2-3 year bank run by wire transfer, said Lorne Baring, managing director at B Capital, a Geneva-based pan European wealth management firm. How long can these bank runs continue before banking systems start to collapse? #12 Preparations For The Collapse Of The Eurozone Visa Europe is holding weekly meetings to discuss scenarios in the event the euro zone collapses, joining other companies that are preparing for a potential breakup of the currency bloc. Chief Commercial Officer Steve Perry said Tuesday that management at the U.K.-based credit-card company meets weekly to explore various possible outcomes, including a total collapse of the euro zone. #13 Global Lending Is Slowing Down #14 Sophisticated Cyber Attacks On Banks Sixty million euro has been stolen from bank accounts in a massive cyber bank raid after fraudsters raided dozens of financial institutions around the world. According to a joint report by software security firm McAfee and Guardian Analytics, more than 60 firms have suffered from what it has called an insider level of understanding. What happens someday if we wake up and all the money in the banks is gone? #15 U.S. Municipal Bankruptcies Stockton, California, said it will file for bankruptcy after talks with bondholders and labor unions failed, making the agricultural center the biggest U.S. city to seek court protection from creditors. The city is fiscally insolvent and must seek Chapter 9 bankruptcy protection, Stockton said in a statement released yesterday after its council voted 6-1 to adopt a spending plan for operating under bankruptcy protection. #16 The Obamacare Decision #17 The U.S. Election We definitely live in interesting times. Personally, I am deeply concerned about the September, October, November timeframe. The other day, Joe Biden delivered a speech in which he made the following statement. Its A Depression For Millions And Millions Of Americans. And what Biden said was right for once. Millions of Americans are out of work right now and millions of Americans have fallen out of the middle class in recent years. If you have lost everything, it does feel like you are living through a depression. When people lose everything, they tend to get desperate. And desperate people do desperate things especially when they are angry. A whole host of recent opinion polls have shown that anger and frustration in the United States are rising to unprecedented levels. The ingredients are certainly there for an explosion. Someone just needs to come along and light the fuse. We truly do live in frightening times. Let us hope for the best, but let us also prepare for the worst. This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here. linkwithin_text=Related Articles: 