Yes, it is officially time to
start freaking out about the global economy. The European financial
system is falling apart and it is going to go down hard. If Europe was
going to be saved it would have happened by now. The big money insiders
have already pulled their funds from vulnerable positions and they are
ready to ride out the coming chaos.
Over the next few months
the slow motion train wreck currently unfolding in Europe will continue to
play out and things will likely really start really heating up in the fall
once summer vacations are over.
Most Americans greatly
underestimate how much Europe can affect the global economy. Europe
actually has a larger population than the United States does. Europe also
has a significantly larger economy and a much larger banking system. The
world is more interconnected today than ever before, and a collapse of the
financial system in Europe will cause a massive global recession. Once
the global economy slides into another major recession, it is going to
take years to recover. The pain is going to be immense. Yes, that is
going to include the United States. Sadly, we never recovered from the
last recession, and it is frightening to think about how much further this
next recession is going to knock us down.
The big problem is that there is simply way, way, way too
much debt in the United States and Europe. It has been a lot of fun
spending all of this borrowed money, but now we get to pay the price.
The following are 19 reasons why it is time to start
freaking out about the global economy....
#2 The yield on 10 year Spanish bonds has
now risen to more
than 7 percent. This is considered to be an unsustainable level.
#3 Citigroup Chief Economist Willem Buiter says that both Italy and Spain are going to need major
bailouts.
#4 The Spanish banking crisis continues to
get worse. The following is from aCNN article that was posted on Monday....
But the depth of the nation's crisis has raised doubts about
whether €100 billion will be enough to recapitalize the banks. For
example, the Bank of Spain, the nation's central bank, released data
Monday showing that "doubtful" loans -- those that are more than
3 months overdue -- rose to €152.7 billion in April, equal to 8.7% of
all the loans held by the nation's banks
#5 Unemployment
in Spain is sitting at a record high of over 24 percent with no hope in sight.
#7 The socialists won an outright majority in the recent parliamentary
elections in France. That means that France and Germany are now headed in
completely different directions. The close cooperation that we have seen
between France and Germany in recent years is now over.
#8 New French President Francois Hollande has promised to implement
a top tax rate of 75 percent on those making over 1
million euros a year.
#9 German Chancellor Angela
Merkel has declared that Germany will not budge at all on the terms of the Greek bailout.
#10 Analysts at Citigroup Global Markets are projecting that
the odds of Greece leaving the euro over the next 12 to 18 months are
still between 50 and 75
percent.
#11 Money is being transferred from banks
in southern Europe to banks in northern Europe at an astounding pace....
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.
'It's 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.
#12
As I wrote about recently, about
500 million euros a day has
been pulled out of Greek banks so far this month.
#14
Lloyd's of London has publicly admitted that it
is making preparations for a collapse of the eurozone.
#15 Government debt levels all over the industrialized world have
exploded in recent years. The following is from a recent article by
Stephen Lendman....
Five years ago,
OECD countries sovereign debt/GDP ratios were 70%. Today it’s 106%
and rising.
Anything over 100%
is considered to be an extremely dangerous level.
#16
The economic problems in Europe are already taking a toll on the U.S.
economy. At this point U.S. exports to Europe are way down.
#17 One recent poll found that 75 percent of Americans are either
"very or somewhat worried" that the
U.S. economy is heading for another recession.
#18
Under Barack Obama, the United States has been indulging in a debt
binge unlike anything ever seen in U.S. history. The following is from a
recent Forbes
article....
After just one year of the
Obama spending binge, federal spending had already rocketed to 25.2% of
GDP, the highest in American history except for World War II. That
compares to 20.8% in 2008, and an average of 19.6% during Bush’s two
terms. The average during President Clinton’s two terms was 19.8%,
and during the 60-plus years from World War II until 2008 — 19.7%.
Obama’s own fiscal 2013 budget released in February projects the
average during the entire 4 years of the Obama Administration to come in
at 24.4% in just a few months. That budget shows federal spending
increasing from $2.983 trillion in 2008 to an all time record $3.796
trillion in 2012, an increase of 27.3%.
Moreover, before Obama there had never been a deficit
anywhere near $1 trillion. The highest previously was $458 billion, or
less than half a trillion, in 2008. The federal deficit for the last
budget adopted by a Republican controlled Congress was $161 billion for
fiscal year 2007. But the budget deficits for Obama’s four years
were reported in Obama’s own 2013 budget as $1.413 trillion for
2009, $1.293 trillion for 2010, $1.3 trillion for 2011, and $1.327
trillion for 2012, four years in a row of deficits of $1.3 trillion or
more, the highest in world history.
#19 Barack Obama
almost seems more focused on his golf game than on the problems the global
economy is having. He just finished up playing his 100th round of golf since he became president.
If you are looking for some kind of a global financial miracle you
can stop watching.
If European leaders had a master plan to
save Europe they would have shown it by now.
If Barack Obama
had a master plan to fix things he would have implemented it by now.
If the Federal Reserve had a master plan to fix things we would have seen
it by now.
The entire house of cards is starting to come down
and things are going to get really messy.
A lot of people both
in the United States and in Europe are going to lose their jobs and their
homes over the next few years. It is likely that the next recession
will be even more painful than the last one was.
Now is not
the time to panic. If you acknowledge what is coming and prepare
accordingly then you will likely be in good shape.
But if you
stick your head in the sand and pretend that everything is going to be
okay then the next few years will likely be incredibly painful for you.
DISCLAIMER: All of the provided information is believed to be accurate, however errors are possible. The opinions in the Commentary section do not necessarily reflect the opinions of GoldIRAS.com. Past performance of any investment is no guarantee of future performance. All investments have risk.
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