A warning of “major war” involving Russia and the United States has come from Lt. Gen. Michael Flynn, the former Defense Intelligence Agency head who was fired by Obama after his agency submitted a 2012 assessment that U.S. policy was leading toward a “Salafist caliphate” in Iraq and Syria (i.e., what became ISIS). Lt. Gen. Flynn was interviewed by Russia’s Kommersant Vlast magazine on Dec. 30.

The interview is wide-ranging and combative, and includes Gen. Flynn’s assessment that there are “5-10,000 Russian citizens fighting [for ISIS—ed.] in Syria,” making it a strategic necessity for Russia to be fighting the terrorists in Syria “so that they don’t return to Chechnya, Dagestan, Uzbekistan, Moscow.”

But the general says it is urgent that the Obama Administration stop arming groups. And he warns where that policy is heading. “When I look at what’s going on—how things are—I can see that a huge threat hangs over us,” Flynn told Kommersant Vlast. “The direction in which we are currently moving leads to a widening of the conflict—to a major war. The closer we are to it, the higher the risks, the higher the price, the more limited our choices.

“So now it is important that we work together, the United States and Russia, to determine whether we can develop more opportunities together to stabilize the situation,” Flynn concludes. 

The financial publication Market Oracle Sunday runs a forecast by Graham Summers that “The EU’s banking system will crash” in 2016. Summers notes that the entire banking system of the City of London and the rest of Europe, with negative interest rates and expanding quantitative easing (QE) by the ECB, is now leveraged at 26:1, rivaling the leveraging of the Wall Street banks by the end of 2007.

With the mandatory policy of bank bail-ins, the costs of that crash will be looted out of the lives of European populations.

Summers correctly adds Japan’s financial system, which is “insolvent. The country has no choice but to continue to implement QE, or else it will go to crash in a matter of months. However, with the Bank of Japan already monetizing ALL of the country’s debt issuance, the question arises, just what else can it buy?”

But Market Oracle leaves out the U.S. financial system. Standard and Poor’s has just reported that the portion of “high-yield” or “junk debt” in the U.S. financial system which is distressed—i.e., delinquent—reached a peak of 24.5% in December, the highest level since—of course—late 2008. S&P calls this debt sector “speculative grade,” meaning largely junk bonds and leveraged loans. The oil and gas sector accounted for about 30% of the distressed high-yield debt issuers, whose distressed debt spiked from $180 billion to $233 billion in a month, from November to December. The S&P finding was reported in the publication Oil and Gas Weekly on Jan. 2.

The U.S. junk debt bubble has reached $3.6 trillion, according to the FDIC, having grown by 20% ($750 billion) in 2015. This is $1.5 trillion in non-investment grade (junk) bonds, $1.9 trillion in leveraged loans, and $250 billion in collateralized loan obligations. And the interest rate on this $3.6 trillion has jumped up to range from 9.8% (BB bonds and leveraged loans) to 18% (CCC junk bonds), making it all nearly impossible to refinance, or to service. By contrast, the U.S. subprime mortgage bubble reached a total $1.4 trillion in MBS in 2007. Nor did subprime delinquency rates ever get above 25% before the 2008 bank crash.

The Financial Times added, in a Dec. 30 commentary, the question of derivatives poison: “The downturn in commodity debt is exacerbated by increased financialisation, which converted commodities into tradeable equivalents. Cash flows from future sales were monetised to raise large amounts of debt to finance expansion. The collateral value of commodities secured expansion in borrowing and trading. Derivatives allowed new participants, other than consumers and producers, to invest in and trade commodity price expectations.”