Looks like the eurozone endgame is approaching, with events that could trigger a domino effect. As usual Ambrose Evans-Pritchard has his finger on the pulse in his article:
Spain Nationalises Bankia as Euro Crisis Escalates
We all know you can’t solve the problem of debt by going deeper into debt. But that’s exactly what governments all over the world are doing – particularly those in the Western hemisphere.
But what happens when the 30-year-old debt super-cycle unravels? The following interview with David Stockman tells it like it really is:
The global economic situation remains unpredictable, but in certain areas of the world – namely Europe and the USA – the economic signals are dire indeed.
The obvious remedy is that governments everywhere need to “trim their cloth” and cut costs – austerity in other words. But an electorate raised on the socialist dream of hand-outs and “something for nothing” is deeply unhappy about things and starting to respond in kind at the ballot box.
In the UK the local elections have returned large Labour majority,s and in France it looks like a socialist President will be returned – one who promises to tax those who earn more than $1 million at the rate of 75% no less!
Yes, governments everywhere are between a rock and a hard place, as they attempt to weigh the need to cut costs with the need to be re-elected – by an electorate in no mood to have government benefits reduced.
David Galland of Casey Research takes a close look at all this in his excellent essay:
Here’s some interesting news with potential ramifications… the disclosure of 450 banker resignations from world banks, investment houses and money funds. Do they know something?
This fascinating article looks at what it calls “Generation Flux” – the new economy where everything is changing so fast, you need a different mindset to survive. And what makes the idea so fascinating is that the state as we know it, probably won’t.
By Doug Casey
Everyone knows that the US government is bankrupt and has been for many years. But I thought it might be instructive to see what its current cash-flow situation actually is. At least insofar as it’s possible to get a clear picture.
As you know, the so-called Super Committee recently tried to come up with a plan to cut the deficit by $1.5 trillion and failed completely. To anyone who understands the nature of the political process, the failure was, of course, as predictable as it was shameful. What’s even more shameful, though, is that the sought-after $1.5 trillion cut wasn’t meant to apply to the annual budget but to the total budget of the next 10 years – a fact that is rarely mentioned.
Now whenever the chattering classes talk about cuts, it’s always about cuts over the course of 10 years. Which is a dodge, partly because most of the supposed cuts will be scheduled for the end of the period, but also because new programs, new emergencies and hidden contingencies will creep in to offset any announced cuts. So the numbers below aren’t a worst case; they’re the rosiest possible scenario. People have thought I was joking when, asked how bad the Greater Depression was going to be, I answered that it would be worse than even I thought it would be. But I haven’t been joking.
Paul Craig Roberts hits the nail on the head regarding the “false” hope and recovery announced by the media regarding the Euro zone’s plans to shore up its finances and the USA’s supposed ‘surge’ in consumer spending. Just spin, spin and more spin:
Ron Paul is perhaps the only US politician to overtly side with Austrian Economics. And in that sense his criticism of the US Federal Reserve (as the creator of federal reserve notes and manipulator of interest rates) is based on the Austrian analysis that money is a “good” like any goods in the market. And because money is a good, it has a market price – the interest rate. But when the government, through its central bank, manipulates the price of money it distorts the economy – with disastrous consequences.
If you’re trying to grasp this concept and want to get your head around it, then I recommend you read this excellent article by Ron Paul in the Wall Street Journal: Blame The Fed For The Financial Crisis
The Euro zone’s debt woes won’t go away. As I write this note there is one last “barrier” to the Greek bailout – Slovakia, which is balking at the idea. In fact, Richard Sulik- leader of Slovakia’s Freedom and Solidarity Party – was quoted as saying: “The rescue fund is simply buying time in an incredibly costly way, but it’s not solving the problems.”
And he’s right.
The only solution is to let Greece default. All this talk about bailing out “Greece” is a cover story. The bailout is for the banks that have been lending money to Greece. Banks made bad loans and they want their losses covered by taxpayer-funded bailouts. It’s not the Greeks who will benefit from this – not, not at all – as they will be screwed down by ever-increasing austerity measures.
All this is just good money after bad. The planned bailout will not fix the underlying problem, only put it off. Then there will be the need for an even larger bailout in the not-too-distant future – and more pleading by the special interests.
At the end of the day, Greece will default. And all that bailout money will have been for naught – except to prop up the banks bad lending policies.
Those who lend to governments need their heads read. I have no sympathy. Let them lose their money for being wrong-headed. Who said investing in anything was a safe?
If you and I can go bankrupt, if companies can go bankrupt, then so can banks – and even nations.
Just get on with it, offload all the toxic debt – and start over.
