Dow Jones Industrial Average: Next Major Global Economic Dislocation May Be Weeks Away

Chris Martenson: For years we’ve preached the From the Outside In principle of markets: When trouble starts, it nearly always does so out in the weaker periphery before creeping towards the core.
We saw this in the run-up to the housing bubble collapse, as sub-prime mortgages gave way before prime loans, and in Europe, as smaller economies like Greece, Ireland, and Cyprus have fallen first and hardest (so far).  We see this today in accelerating food stamp use among poorer U.S. households.  In each case, the weaker economic parties give way first before being followed, over time, by the stronger ones.
Using this framework, we can often get several weeks to several months of advance notice before trouble erupts in the next ring closer to the center.

Which makes today notable, as we’re receiving a number of new warning signs.  The periphery is giving way.
Ever since the current economic “recovery” began, we’ve been warning of the high risk of a renewed financial crisis.  That risk is now uncomfortably high.  This is because nothing that led to the first round of troubles was actually addressed at the root level.  Instead, prior troubles were simply papered over with central-bank liquidity, leaving structural weakness intact – for instance, our ‘too big to fail’ banks are just as big, and our sovereign debt levels are even worse than they were pre-2008.
The next crisis will be larger and more damaging than the last one, principally because nothing got fixed, political capital was spent, and trust has been eroded, leaving everyone depleted and ready to bolt for the financial exits.
With the periphery failing, we likely have only weeks – perhaps a month or two – until the next big dislocation hits.
Déjà Vu (All Over Again)
We’ve been here before.  We’ve seen trouble start on the outside and progress inwards, and not all that long ago.
In 1999 and 2007, we saw the financial markets blithely trundle along higher, even as clear signs of trouble at the margins were abundant.
One of the common myths about the stock market, often repeated in the press, is that it peers into the future.  The market is the ‘great discounting machine.’
But the stock market powered higher into the new millennium, despite being the most overvalued it had ever been in history, before diving violently in 2001.  So much for peering into the future.
And again, the Dow Jones Industrial Average (INDEXDJX:.DJI) went to new heights in 2007,

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