COLLAPSE

Wars and rumors of wars

2012-02-04T10:08:00.000-08:00

First issues in Iran, from Business Insider

There are so many snippets of rhetoric being reported about Iran, Israel and the U.S. that it's begun to feel like a middle school circle of "he said, she said."

Piecing together sound bites to form a rough idea of what's actually going on is about the only option available right now, so when Leon Panetta announced yesterday that he thinks Israel may strike Iran this spring it immediately made the news.
David Ignatius at The Washington Post reported Panetta's thoughts Thursday when the Secretary of Defense said he believed Israel would launch an attack on Iran in April, May or June.

After that, Israel allegedly believes Tehran will enter a "zone of immunity" where they will have enough enriched uranium, stashed in bunkers deep enough, that only U.S. bombs will be able to penetrate and they will be helpless to act on their own.
Ignatius did not cite a source, but reported the news from Brussels where Panetta was attending a NATO Defense meeting.
It's a reasonable argument, bolstered by the fact that Israel cancelled its massive missile defense drill with the U.S., slated for the same period, saying that they couldn't spare the forces at that time. The drill is said to be back on the books for October.
For its part, Iran is doing nothing to assuage any concerns over its intentions as it launched a satellite into orbit Friday.
Nasser Karimi at the Associated Press reports the launch raises concerns not only for the satellite's possible military applications, but because the rocket that delivered it uses the same technology as a ballistic missile would use. Say, an inter-continental ballistic missile fitted with a nuclear warhead.

Israel announced Thursday that Iran is developing technology that will enable it to launch such a missile that will reach the continental United States. This satellite launch only reinforces this possibility.

In an official announcement the Iranian supreme leader warned any action against Iran will have dire effects on the U.S.
CNN reports that Iran's supreme Leader Ayatollah Khameni announced "You see every now and then in this way they say that all options are on the table. That means even the option of war." During Friday prayers in Tehran, he continued, "This is how they make threats against us."

"Well, these kinds of threats are detrimental to the U.S.," he said. "The war itself will be 10 times as detrimental to the U.S."
The Ayatollah went on to say that Iran pledges its full support to any country or organization that attacks Israel and that the U.S. and Israel will soon face defeats in a coming "great event."

In a random aside: A South African telecom is being sued for aiding Iran's nuclear development in exchange for an exclusive cellular license within the country.

Next issues continue to develop with Syria...and Russia, from Zero Hedge

UPDATE: Hardly reassuring (from Bloomberg): *U.S. IS `DISGUSTED' WITH RUSSIA, AMBASSADOR RICE SAYS AT UN

The world is suddenly aflutter in its usual fake indignation (how many times have we seen this) having realized what has been going on in Syria for months on end. It was none other than the Headhunter In Chief who "condemned the "unspeakable assault" Saturday by Syrian forces on the city of Homs, a sustained attack that activists say killed more than 200 people in what may be the bloodiest confrontation of the uprising against Bashar Assad's regime. The assault sparked fierce international outcry ahead of a meeting Saturday of the U.N. Security Council, where the U.S. and other nations are pushing for a vote on an Arab League-backed resolution calling for Assad to step down." Needless to say, just like in the case of Libya, both China and Russia are now a confirmed veto for any security council resolution that enforces a regime change, no fly zone, or what have you. Only this time the stake for Russia (and China as well, as Syria is nothing but a gateway to Iran), are far higher. And as Zero Hedge noted regarding Iranian developments yesterday, "We've seen this play by play many times before and frankly at this point the posturing is getting just silly. What we do want to find out, however, is how will Russia get involved in all of this. Because if recent actions are any precedent, we fully expect Putin to send an aircraft carrier, purely symbolically, in the Arabian Sea himself, just to indicate that any invasion, pardon, liberation, of Iran crude, will first have to go through him. And not to mention China... or India." Sure enough, speaking of aircraft carriers, it was none other than the Russian navy's aircraft carrier Kuznetsov that landed at the Russian naval base in Tartus "in support of the al-Assad regime" back in November, and it is the Tartus base that is arguably one of the most critical locations for the US military vis-a-vis developments in the middle east. And here is why Russia will block any attempt by the west to impose its own will in Syria.
The Russian naval base in Tartus, Syria.

Tartus hosts a Soviet-era naval supply and maintenance base, under a 1971 agreement with Syria, which is still staffed by Russian naval personnel. The base was established during the Cold War to support the Soviet Navy's fleet in the Mediterranean Sea. During the 1970s, similar support points were located in Egypt and Latakia, Syria. In 1977, the Egyptian support bases at Alexandria and Mersa Matruh were evacuated and the ships and property were transferred to Tartus, where the naval support base was transformed into the 229th Naval and Estuary Vessel Support Division. Seven years later, the Tartus support point was upgraded to the 720th Logistics Support Point.

In 1991, the Soviet Union collapsed and its Mediterranean fleet, the 5th Mediterranean Squadron which was composed of ships from the North Sea Fleet and the Black Sea Fleet, ceased its existence. Since then, there have been occasional expeditions by Russian Navy vessels and submarines to the Mediterranean Sea. The naval logistics support base in Syria is now part of the Black Sea Fleet. It consists of three floating docks of which one is operational, a floating workshop, storage facilities, barracks and other facilities.

Since Russia forgave Syria of three-fourths, or $9.6 billion, of its $13.4 billion Soviet-era debt and became its main arms supplier in 2006, Russia and Syria have conducted talks about allowing Russia to develop and enlarge its naval base, so that Russia can strengthen its naval presence in the Mediterranean. Amid Russia's deteriorating relations with the West, because of the 2008 South Ossetia War‎ and plans to deploy a US missile defense shield in Poland, President Assad agreed to the port’s conversion into a permanent Middle East base for Russia’s nuclear-armed warships. Since 2009, Russia has been renovating the Tartus naval base and dredging the port to allow access for its larger naval vessels.

On September 8, 2008, ten Russian warships docked in Tartus. According to Lebanese-Syrian commentator Joseph Farah, the flotilla which moved to Tartus consisted of the Moskva cruiser and four nuclear missile submarines. Two weeks later, Russian Navy spokesman Igor Dygalo said the nuclear-powered battlecruiser Peter The Great, accompanied by three other ships, sailed from the Northern Fleet's base of Severomorsk. The ships would cover about 15,000 nautical miles (28,000 km) to conduct joint maneuvers with the Venezuelan navy. Dygalo refused to comment on reports in the daily Izvestia claiming that the ships were to make a stopover in the Syrian port of Tartus on their way to Venezuela. Russian officials said the Soviet-era base there was being renovated to serve as a foothold for a permanent Russian navy presence in the Mediterranean.

In 2009, RIA Novosti reported that the base would be made fully operational to support anti-piracy operations. It would also support a Russian naval presence in the Mediterranean as a base for "guided-missile cruisers and even aircraft carriers".

Warning Signs

2012-01-18T16:39:00.000-08:00

Article Source
The warning signs are all around us. All we have to do is open up our eyes and look at them. Almost every single day there are more prominent voices in the financial world telling us that a massive economic crisis is coming and that we need to prepare for the worst. On Wednesday, it was the World Bank itself that issued a very chilling warning. In an absolutely startling report, the World Bank revised GDP growth estimates for 2012 downward very sharply, warned that Europe could be on the verge of a devastating financial crisis, and declared that the rest of the world better "prepare for the worst." You would expect to hear this kind of thing on The Economic Collapse Blog, but this is not the kind of language that you would normally expect to hear from the stuffed suits at the World Bank. Obviously things have gotten bad enough that nobody is even really trying to deny it anymore. Andrew Burns, the lead author of the report, said that if the sovereign debt crisis gets even worse we could be looking at an economic crisis that could be even worse than the last one: "An escalation of the crisis would spare no-one. Developed- and developing-country growth rates could fall by as much or more than in 2008/09." Burns also stated that the "importance of contingency planning cannot be stressed enough." In other words, Burns is saying that it is time to prepare for the worst. So are you ready?
But of course it isn't just the World Bank that is warning about these things. The chorus of voices that is warning about the next great financial crisis just seems to grow by the day.

Some of these voices were profiled in a Bloomberg article the other day entitled "Apocalypse How? Dire ’12 Forecasts". The following is just a sampling of quotes from that article....
-John Mauldin, president of Millennium Wave Advisors: "We've got a cancer. That cancer is debt"
-Mark Spitznagel of Universa Investments: "Too much malinvestment has been kept alive, and history shows an inevitable wipeout, which started in 2000."
-Michael Panzner of Financial Armageddon: "The fundamental outlook is even worse now than it was a few weeks ago, given (the lack of positive) developments in Europe and growing evidence that the economies of major countries around the world are deteriorating fast."

If you have time, you should go check out the rest of that article. It really is fascinating.
When this crisis is over, all sorts of people are going to be running around claiming that they predicted it. But it does not take a genius to see what is coming. All you have to do is open up your eyes and look at the flashing red warning signs.

So what should we all be looking for next?

March 20th is a key date to keep your eye on. That is the day when Greece will either makes its 14.5 billion euro bond payment or it will default.

Greece does not have a prayer of making that payment without help. If Greece can convince the EU and the IMF to release the next scheduled bailout payment and if Greece can reach a satisfactory deal with private bondholders, then the coming Greek default might be "orderly". But if something goes wrong, the coming Greek default might be quite "disorderly".

At this point, almost everyone in the financial world is anticipating a Greek default of one form or another....
-Edward Parker, the managing director for Fitch's sovereign and supranational group in Europe, the Middle East and Africa, recently declared that a Greek default is inevitable....

"It is going to happen. Greece is insolvent so it will default."

-Moritz Kraemer, the head of S&P's European sovereign ratings unit, made the following statement on Bloomberg Television on Monday:

"Greece will default very shortly. Whether there will be a solution at the end of the current rocky negotiations I cannot say."

-Richard McGuire, a strategist at Dutch bank Rabobank, was recently quoted by CNBC as saying the following....

"People often ask if Greece is going to default which ... is a misnomer because Greece is (already) defaulting"

-Diane Swonk, the chief economist at Mesirow Financial in Chicago, says that the default by Greece will probably be an "orderly" one but that the situation could change at any moment....

"It appears at the moment that the market is accepting a Greek default as inevitable, and it will be an orderly default. But that can change on a dime."

But whether there is a default or not, the reality is that Greece is already experiencing a full-blown economic depression. In Greece, 20 percent of all retail stores have already shut down. The unemployment rate for those under the age of 24 is now at 39 percent. Large numbers of Greeks are trying to get themselves and their money out of the country while they still can.

Pessimism regarding Greece is at an all-time high. Michael Fuchs, the deputy leader of Angela Merkel's political party, recently made the following statement....

"I don't think that Greece, in its current condition, can be saved."

But of course Greece is not the only declining economy in Europe by a long shot.
Italy has a much larger economy, and if Italy totally collapses it will be an absolute nightmare for the entire globe.

Right now, the Bank of Italy is forecasting a significant recession for the Italian economy in 2012. The following is from a statement that Bank of Italy has just released....

"The uncertainty that surrounds the medium-term perspectives of the Italian economy ... are extraordinarily high and are directly linked to the evolution of the eurozone debt crisis"

Italy's youth unemployment rate has hit the highest level ever, and nearly all sectors of the Italian economy are showing signs of slowing down.
Plus there is the looming problem of Italian debt. As I wrote about yesterday, when you add the maturing debt that the Italian government must roll over in 2012 to their projected budget deficit, it comes to 23.1 percent of Italy's GDP.

Originally it was hoped that the economic problems in Europe could be contained to just a few countries. But now it has become clear that is just not going to happen.
Trends forecaster Gerald Celente recently explained to ABC Australia that much of Europe is already essentially experiencing an economic depression....

"If you live in Greece, you’re in a depression; if you live in Spain, you’re in a depression; if you live in Portugal or Ireland, you’re in a depression,” Celente said. “If you live in Lithuania, you’re running to the bank to get your money out of the bank as the bank runs go on. It’s a depression. Hungary, there’s a depression, and much of Eastern Europe, Romania, Bulgaria. And there are a lot of depressions going on [already]."

The troubling news out of Europe just seems to keep coming in waves. Here are some more recent examples....
-Manufacturing activity in the euro zone has fallen for five months in a row.
-Germany's economy actually contracted during the 4th quarter of 2011.
-It is being reported that the Spanish economy contracted during the 4th quarter of 2011.
-Bad loans in Spain recently hit a 17-year high and the unemployment rate is at a 15-year high.

So will all of this economic trouble eventually spread to the United States?
Of course it will.

The global economy is more interconnected today than ever. Back in 2008 the financial crisis that started on Wall Street ended up devastating economies all over the planet. The same thing will happen during this next great financial crisis.Only this time the U.S. is in a much weaker position. The U.S. debt problem has gotten much worse since the last crisis.During 2008, our national debt crossed the 10 trillion dollar mark. Less than 4 years later, we have crossed the 15 trillion dollar mark.

So what are we going to do the next time large numbers of banks fail and unemployment skyrockets?
Where are we going to get the money to bail out all of those banks and to take care of all of those newly unemployed people?
Some people say that socialism is the answer, but the truth is that we are already a socialist welfare state. If you can believe it, nearly half of all Americans live in a household that receives some form of financial benefits from the U.S. government.

During the next great crisis, the number of people that are dependent on the government will go even higher.
If you don't want to end up dependent on the government, you should heed the warning signs and you should use this time to prepare for the hard times that are coming.When even the World Bank tells us to hope for the best but to prepare for the worst, you know that it is late in the game.

Unfortunately, the vast majority of people out there only believe what they want to believe. They don't want to believe that a great economic crisis is coming, and so when it does happen they are going to be absolutely blindsided by it.

NDAA,should you be concerned?

2012-01-05T18:37:00.000-08:00

Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.

George Washington
Below is an interesting essay on the NDAA ORIGINAL SOURCE

On New Year's Eve, President Obama signed into law a bill that eliminates one of the fundamental protections of the U.S. Constitution:

The right for people not to be detained indefinitely by the government without being formally convicted of crimes.

This erosion of the Constitution, which came in the form of new language in the annual National Defense Authorization Act (NDAA), allows the government to hold anyone suspected of being associated with terrorism indefinitely, without any form of due process.
No indictment.
No judge or jury.
No evidence.
No trial.
Just an indefinite jail sentence.

In other words:
If someone in the government suspects that you're somehow associated with terrorism, you can be jailed indefinitely in a military prison.

Defenders of this language — including Senators John McCain (R) and Carl Lavin (D), who sponsored it — position it as being tough on terrorism.

And that's fine: Everyone wants to be tough on terrorism.

There are ways of being tough on terrorism that preserve basic rights. Unfortunately, this isn't one of them.
If the government and military never made mistakes--if they never suspected people of being associated with terrorism who aren't actually associated with terrorism--then this language wouldn't be so scary.
But, like anyone else, governments and armed-forces personnel do make mistakes.

Frequently.

So removing the intelligent and reasonable requirement that government suspicions be subjected to due process is frightening.

Of course, in signing the bill, President Obama promised that he would never use it to detain Americans.
While that's comforting, other Presidents may not feel compelled to honor that promise. And human-rights activists who don't believe that basic human rights apply only to American citizens are justifiably upset that America can now detain anyone indefinitely without due process.

(And, by the way, the common pushback that the bill cannot be used to detain Americans is a crock. The bill clearly states that Americans are not "required" to be detained indefinitely. Not being "required" to do something, and "preventing" something are quite different.)

To be clear: This bill isn't just tough on terrorism. It overturns a key part of the Constitution. And it presumes that those who serve in the government and military are always omniscient and perfect and will always use their power for the good of all citizens.

And that presumption, as everyone who has ever watched our government in action knows, is laughable.
Will America be transformed into a brutal police-state by this one bill? Probably not. But the constitutional protections and other checks-and-balances that separate democracies from authoritarian states are rarely eliminated in one fell swoop.

Rather, theses protections are eliminated gradually, by governments and rulers who incrementally grant themselves ever more power.

Taken individually, each incremental change may seem well-meaning and justifiable.

But, gradually, the checks-and-balances that form the basis of a fair society are eliminated.

In signing the NDAA bill, President Obama was presumably yielding to political expediency. The bill, after all, had military funding attached.

But that's no excuse.

The Presidential veto is supposed to function as a critical check-and-balance in our system, to be invoked when Congress collectively goes insane.

And this is one bill that Obama should have vetoed

European Banking system failing

2011-12-21T19:19:00.000-08:00

SOURCE
I have learned that watching what people do is much more important than listening to what they say. Back in 2008, financial authorities in the United States insisted that everything was gone to be okay. But we all know now that was a lie. Well, right now financial authorities in the U.S. and Europe are once again trying to assure us that everything is under control and that we are not headed for a global recession. Unfortunately, their actions are telling a very different story. All over the world, bailouts are flying around as if the end of the world is coming. Governments and central banks are stepping in with gigantic mountains of money to prop up bond yields, major banks and even stock markets. What we have seen over the past few months has been absolutely unprecedented. So why are such desperate measures being taken if everything is going to be just fine? Unfortunately, debt problems are never solved with more debt, so these bailouts really aren't solving anything. We are still headed for a massive amount of financial pain. It would just be nice if the authorities would quit lying to us and would actually admit how bad things really are.

Today it was announced that the European Central Bank has agreed to make $638 billion in 3 year loans to 523 different banks. Never before (not even during the last financial crisis) has the ECB loaned so much cheap money to European banks at one time.

This move by the ECB made headlines all over the globe. CNBC is calling them "ultra-long and ultra-cheap loans".

European authorities are hoping that European banks will use this money to make loans to businesses and to buy up the debt of troubled European governments.

But as we have seen in the United States, bailout money does not always get spent the way that the authorities intend for it to be spent. The truth is that the banks could end up just sitting on the money. That is what happened with a lot of bailout money in the United States during the last financial crisis. European authorities hope, however, that European banks will take this super cheap money and lend it to European governments at much higher interest rates.

Unfortunately, global financial markets were not terribly impressed with this move by the ECB. European bond yields actually rose and the euro just kept on falling. Every few days another major "solution" to the European debt crisis is put out there, but so far nothing has worked.

For example, the European Central Bank has already spent over 274 billion dollars directly buying up European government bonds, and yet bond yields continue to hover in very dangerous territory.
But without ECB intervention, we probably would have already seen a major financial collapse in Europe.
The financial system of Europe is a total mess right now, and everyone is becoming incredibly dependent on the ECB. The following comes from a recent Reuters article....

One of the key factors certain to have boosted demand is that banks are now more reliant than ever on central bank funds. The ECB said on Monday, in its semi-annual Financial Stability Review, that this dependency could be difficult to cure.
French banks have almost quadrupled their intake of ECB money since June to 150 billion euros, while banks in Italy and Spain are each taking more than 100 billion euros.

At this point, the ECB has the weight of the entire world on its shoulders. One false move and we could see a huge wave of bank failures and we could be plunged into a major global recession. But even with all of this unprecedented assistance, we have already seen some big time European banks fail. Back in Obtober, Dexia was the first major European bank to be bailed out, and the cost of that bailout is going to exceed 100 billion dollars.The funny thing is that Dexia actually passed the banking stress test that was conducted earlier this year with flying colors.

So what does that say about all of the other major European banks that did not do so well on the stress test?
In addition, it was recently announced that Germany's second largest bank is going to need a bailout.
The following comes from a Sky News report....

Germany's second largest bank, Commerzbank, is reportedly in discussions with the German government about a bailout after regulators said it needed to raise more money to cope with a potential default on its loans to governments.
"Intense talks" have been going on for several days, according to sources who spoke to the news agency Reuters.

Even with unprecedented intervention by the ECB, the truth is that the European banking system is rapidly failing. In Greece, a full-blown run on the banks is happening. According to a recent Der Spiegel article, funds are being pulled out of Greek banks at a pace that is astounding....

He means that the outflow of funds from Greek bank accounts has been accelerating rapidly. At the start of 2010, savings and time deposits held by private households in Greece totalled €237.7 billion -- by the end of 2011, they had fallen by €49 billion. Since then, the decline has been gaining momentum. Savings fell by a further €5.4 billion in September and by an estimated €8.5 billion in October -- the biggest monthly outflow of funds since the start of the debt crisis in late 2009.

In all, approximately 20 percent of all deposits in Greek banks have been withdrawn since the start of 2011.
Other European nations are implementing draconian measures in an attempt to protect their banks. For example, in Italy all cash transactions over 1000 euros have been permanently banned. People will either have to use checks, debit cards or credit cards for large transactions. This will "encourage" people to keep more money in the banks, and this will also make it much easier for the Italian government to track transactions and to collect taxes.

But it is not just in the EU where we find unusual steps being taken. In the UK, the Bank of England is acting like the end of the world is about to happen. The following comes from a recent article on the This Is Money website....

The deputy governor of the Bank of England today warned the situation surrounding the single currency was ‘worrying’ and that the Bank was making preparations to support British banks, should the eurozone collapse.
A temporary loan facility has been introduced as a precaution, for use in the event of contagion from the eurozone crisis endangering UK institutions, Charlie Bean said in an interview on BBC Radio 4’s World at One.

An article posted on Business Insider a while back says that Switzerland is also preparing for "a euro collapse"....

The Swiss government is preparing for a collapse of the euro, according to Swiss Finance Minister Eveline Widmer-Schlumpf.
She told parliament that a work group was studying the imposition of capital controls and negative interest rates to protect Switzerland from the capital flight that a euro collapse would engender

Frightening stuff.

On the other side of the world, the government of China is also taking action. In fact, China is actually injecting money into the stock market in order to prop up stock prices.
The following comes from an article in the China Post....

In a movement considered “long overdue” by some analysts, the injection of government money into the tanking stock market to prop up stock prices has been given the green light, government officials announced yesterday.
Vice Premier Chen, the topmost government official charged with the country's financial stability, however, insisted the fundamentals of the economy and the stock market are sound, expressing his hope for continued optimism among the people.

Of course the Federal Reserve is not going to stand on the sideline while all of this is going on. In a recent article, I described how the Federal Reserve is helping to bail out European banks....

The Federal Reserve, the European Central Bank, the Bank of England, the Bank of Canada, the Bank of Japan and the Swiss National Bank have announced a coordinated plan to provide liquidity support to the global financial system. According to the plan, the Federal Reserve is going to substantially reduce the interest rate that it charges the European Central Bank to borrow dollars. In turn, that will enable the ECB to lend dollars to European banks at a much cheaper rate. The hope is that this will alleviate the credit crunch which has gripped the European financial system by the throat. So where is the Federal Reserve going to get all of these dollars that it will be loaning out at very low interest rates? You guessed it - the Fed is just going to create them out of thin air. Our currency is being debased so that Europe can be helped out.

If the global financial system was in good shape, all of these bailouts would not be happening.

These desperate measures are a clear sign that something is up.

The financial authorities of the world are doing their best to keep the system together, but in the end they are not going to be able to prevent the collapse that is coming.

The world is heading for incredibly hard economic times. So is the end of the world coming?

No.

But to many in the financial world it may feel like it. The coming global recession is not going to be fun.
We have now reached a point where it has become "normal" for governments and central banks to throw money at one financial crisis after another.

At one time, bailouts were so unusual that they provoked a great deal of outrage. Today, bailouts have become standard operating procedure. The bailouts will continue to get larger and larger, and authorities all over the globe will do their very best to keep the house of cards from coming crashing down.

Unfortunately, they will not be successful.

40 signs America is in decline...

2011-12-20T18:02:00.000-08:00

SOURCE
Is America in decline? That is a very provocative question. I have found that most people that hate the United States are very eager to agree that America is in decline, while a lot of those that love the United States are very hesitant to admit that America is in decline. Well, I am proud to be an American, but I cannot lie and tell you that America is doing just fine. The pieces of evidence compiled below are undeniable. Our economy is deathly ill and is rapidly getting worse. We were handed the keys to the greatest economic machine in the history of the world and we have wrecked it. But until we are willing to look in the mirror and admit how bad things have gotten, we won't be ready for the solutions that are necessary. The truth is that there are things that we can do to reverse the decline. It does not have to be permanent. We have gotten away from the things that made America great, and we need to admit that we are on the wrong path and start fixing this country. But if we choose to continue down the road that we are currently on, it will lead us into the darkest chapters in American history.
The following are 40 undeniable pieces of evidence that show that America is in decline....

#1 Back in 1985, 11 million vehicles were sold in America. In 2009, only 5.4 million vehicles were sold in America.

#2 In 1990, the median age of a vehicle in the United States was just 6.5 years. Today, the median age of a vehicle in the United States is approximately 10 years.

#3 The average price of a gallon of gasoline in 2011 has been $3.50. That is a new all-time record. The previous record was $3.24 in 2008.

#4 The average American household will have spent an astounding $4,155 on gasoline by the time the year is over.

#5 The number of children in the United States without a permanent home has increased by 38 percent since 2007.

#6 A decade ago, the United States was ranked number one in average wealth per adult. By 2010, the United States had fallen to seventh.

#7 The U.S. tax code is now more than 50,000 pages longer than it used to be.

#8 American 15-year-olds do not even rank in the top half of all advanced nations when it comes to math or science literacy.

#9 The United States once had the highest proportion of young adults with post-secondary degrees in the world. Today, the U.S. has fallen to 12th.

#10 After adjusting for inflation, U.S. college students are borrowing about twice as much money as they did a decade ago.

#11 The student loan default rate has nearly doubled since 2005.

#12 Our economy is not producing nearly enough jobs for our college graduates. The percentage of mail carriers with a college degree is now 4 times higher than it was back in 1970.

#13 Our infrastructure was once the envy of the world. Today, U.S. infrastructure is ranked 23rd.

#14 Since December 2007, median household income in the United States has declined by a total of 6.8% once you account for inflation.
#15 Since the year 2000, incomes for U.S. households led by someone between the ages of 25 and 34 have fallen by about 12 percent after you adjust for inflation.

#16 According to U.S. Representative Betty Sutton, America has lost an average of 15 manufacturing facilities a day over the last 10 years. During 2010 it got even worse. Last year, an average of 23 manufacturing facilities a day shut down in the United States.

#17 In all, more than 56,000 manufacturing facilities in the United States have shut down since 2001.

#18 The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.

#19 Manufacturing employment in the U.S. computer industry was actually lower in 2010 than it was in 1975.

#20 In 1959, manufacturing represented 28 percent of all U.S. economic output. In 2008, it represented only 11.5 percent.

#21 The television manufacturing industry began in the United States. So how many televisions are manufactured in the United States today? According to Princeton University economist Alan S. Blinder, the grand total is zero.

#22 The U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.

#23 The Economic Policy Institute says that since 2001 America has lost approximately 2.8 million jobs due to our trade deficit with China alone.

#24 According to one study, between 1969 and 2009 the median wages earned by American men between the ages of 30 and 50 dropped by 27 percent after you account for inflation.

#25 Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs.

#26 The size of the economy in India is projected to surpass the size of the U.S. economy by the year 2050.

#27 One prominent economist believes that the Chinese economy will be three times larger than the U.S. economy by the year 2040.

#28 In 2001, the United States ranked fourth in the world in per capita broadband Internet use. Today it ranks 15th.

#29 Back in the year 2000, 11.3% of all Americans were living in poverty. Today, 15.1% of all Americans are living in poverty.

#30 Last year, 2.6 million more Americans dropped into poverty. That was the largest increase that we have seen since the U.S. government began keeping statistics on this back in 1959.

#31 According to the U.S. Census Bureau, 6.7% of all Americans are living in "extreme poverty", and that is the highest level that has ever been recorded before.

#32 The percentage of children living in poverty in the United States increased from 16.9 percent in 2006 to nearly 22 percent in 2010. In the UK and in France the child poverty rate is well under 10 percent.

#33 As I wrote about the other day, since 2007 the number of children living in poverty in the state of California has increased by 30 percent.

#34 A staggering 48.5% of all Americans live in a household that receives some form of government benefits. Back in 1983, that number was below 30 percent.

#35 Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid.

#36 Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

#37 Today, the "too big to fail" banks are larger than ever. The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.

#38 Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its purchasing power.

#39 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

#40 The U.S. national debt is now nearly 15 times larger than it was just 30 years ago.

Sadly, most Americans are not fired up about turning this country around. Way too many of them realize that things are getting worse, but they have "checked out" and are just going through the motions of life.

Poor Man’s Guide To Survival Gear

2011-12-15T05:36:00.000-08:00

I have had lots of requests recently for information on survival gear and prepping for natural and economic disasters. I do not claim to be any sort of expert and and I do not give any advice personally. Instead I provide articles I personally find interesting and you can read them and judge for yourself what is right or wrong for you and your situation. No claims or guarantees are ever made nor implied. Read, research, and then do what is best for you and yours.

From Brandon Smith of Alt-Market

The Poor Man’s Guide To Survival Gear
Special Note: Obviously, an entire book could be written on this subject, which is a task beyond the scope of this article. The purpose of the following piece is to give those with financial difficulty a foothold on prepping without added pain. It is meant to be a starting point, not a compendium.

A friend of mine took note recently that a large portion of activists involved in the Liberty Movement had hit extremely hard times, or had been struggling financially even before the general economic collapse began to take hold. He asked me my theory on why it was that so many of us are always so broke. I could only relate that it is almost always the working class poor in any society that first sees the effects of a corrupt government and a faulty economic system. Those who legitimately hold to the principles of self sustainment, and fair play, are usually the first to be stabbed in the back by the establishment, and so, they are the first to become politically active against it. That is to say, sometimes we have to lose almost everything before we are able to see the bigger picture.

While I consider this fact a source of solace in these extraordinarily hard times, it still does little to put food on the table, or survival gear in the bug-out-bag.

The overall consensus within the prepper community is that survival planning is expensive, and yes, it certainly can be. Another consensus is that you “get what you pay for”; also true...to a point. My belief is that while no prepping model is free of

expense or of quality concerns, perhaps there is a middle road that activists with thin wallets can take which will provide solid gear for less money, and that will serve most of the functions of high-end gear that is ten times as expensive. Let’s examine a foundation list of those items that can help get you started now….
Backpack (Bug Out Bag)

You can literally spend hundreds of dollars on many top-of-the-line framed backpacks, and some may even be worth it, but it is not necessary to spend that kind of cash to purchase a decent bug-out-bag. In fact, surplus ALICE packs with frames can be had online for as little as $30-$60, sometimes even less if they are a bit worn. The ALICE system provides adequate back support for your needs, for a low price, and the quality of the design is military proven.

Camouflage Clothing
Camouflage clothing and gear runs a wide spectrum in price, and it’s hard sometimes to find the colors you want at a discount. One trick is to buy any camo you find on the cheap, and then lightly dye it to match the colors you want. For instance, one could gauge the dye levels with small samples, find the right strength, and then dye light camo like Digital ACU a darker green. Eventually, you may be able to make your own camo with any clothing you come across. It sounds like a pain, but it’s actually quite easy, and could save you considerable amounts of money.

Extreme Weather Protection

Gortex is outrageously expensive, unless you get lucky and find it used or discounted. While it is difficult to beat the quality (or the warrantee) on most Gortex cold weather gear, there are cheaper alternatives that get the job done almost as well. A great extreme cold weather coat is the N-2B Flight Jacket designed to mil spec and resistant to most wet weather conditions. The jacket was meant specifically to deflect freezing temperatures and it can be had for around $120 or less.
Purchasing several packages of polypropylene thermal underwear could also save your life in extreme weather situations. They are lightweight, can be easily layered, can be packed into a tiny corner of your B.O.B., and will retain much of your body heat. Even if you don’t have a lot of winter gear with you, absolutely do not forget to bring the poly-wear! $30-$50 for a shirt and pants together is well worth it.

Finally, buy wool socks. Buy plenty. Look for deals, but do not cut them out of your budget. Any weather below 20 Degrees Fahrenheit and you’ll want to double up. Cold feet, on a march, on patrol, on guard duty, sucks. They can be damaged permanently if you are not careful.

Combat Boots
Top quality combat boots traditionally run anywhere from $100 to $300 depending on the brand. One rule that you cannot break regardless of the circumstances; always treat your feet right. They hold up your entire body. Surplus boots are a good place to start when looking to cut costs, but usually you won’t be saving much.   To be honest, there are plenty of knockoff combat boots found in sporting goods stores, usually in the hiking section, that are just as durable as the expensive models but for much less. You can go far in a pair of $60 boots. Be sure, though, to thoroughly check for poor sewing on the seams, crap laces, and light construction. If they feel heavy, they are probably made well enough.

Camp Heater

Unless you have your own oil well, or a line on a hidden vein of coal (some preppers I have met actually do), then your best bet for efficient heat during the winter weather in a tent, a makeshift shelter, or a house, is a wood burning stove. Timber fuel sources are everywhere. A couple cords of wood are enough to heat most homes and shelters through the colder months.
Gasoline and propane storage is possible, but the likelihood of shortage is high, and arranging a practical supply lasting a year or more is incredibly expensive. Solar power systems and battery banks are recommended, but again, this is another option that requires moderate to substantial investment when it comes to heating a house. A very affordable alternative for your heating needs would be the M-1941 Military Tent Stove. The cylindrical stove is portable, burns quite hot, and can be had usually for $100 or less.

Survival Knife

Some knives deserve the amount of attention and the high price tag they have garnered, but many are just….well….regular knives with a fancy name engraved in the blade. You are buying a knife for its functionality, not its sex appeal. Gerber, SOG, and Kershaw make plenty of knives which work just as well for $80 or less than any $400 cord wrapped Strider knife. Again, pay for the tool, not the name or the artificial commercial mystic.

Communications
Good HAM radios, base stations to handheld models, can be had for around $200-$300, but even this amount is sometimes too high for a limited prepper budget. Unless you plan to coordinate operations over longer distances using repeaters, or set up a HAM alert system with multiple members of your community, regular two-way radios costing around $40 to $60 like those produced by Midland should suffice for communications. Consumer models often advertize an effective range of 20 to 30 miles, but this is in totally flat terrain. If you can get five miles out of them in rough terrain, you are doing well. This range is adequate to handle most tasks required during a survival situation.

Electricity

Gas powered generators are unnecessary long term survival situations, primarily because the amount of fuel they use is impractical and the noise many of them produce could make having electricity a daily temptation of fate. Solar is really the best way to go. Unfortunately, many people assume solar power solutions to be too technical and overwhelming. In fact, setting up a solar power system is so straight forward it makes all the prepper uneasiness a bit laughable.

A simple and comparably affordable set-up would include one 180 Watt solar panel (which can quickly charge your battery bank during the day), one deep cycle battery, a charge controller, and an inverter. This kit can be had for $600 to $1000, is compact enough to fit a medium Rubbermaid storage bin, and will power almost every appliance and charge every electronic device that would make life easier during a collapse. Remember also that every Watt of power you produce by the sun reduces your on-grid electric bill, saving you even more money.

At the very least, a portable solar powered battery charger is a must have item. Doing without gear like radios and flashlights is simply not an option. Going caveman is the most ill conceived method for living through the worst of all possible situations.

Survival Tin
Pre-made mini survival kits are a rip off. Most of the items they contain (matches, fishing line, compass, small knife, firestarter, wire saw, water purification tablets, etc.) can be easily purchased separately for half the cost. Making your own mini-kit is also a good exercise in efficiency. Being able to prioritize gear and understand what is truly useful versus what is a waste of space is as important a skill as being able to shoot or navigate a map. It does not take a lot of money to build a solid base kit for emergencies….unless you buy one that somebody made for you.

Emergency Medical Kit
Again, all items within most pre-made medical kits can be bought individually for much less. Celox blood stopper, silk sutures, surgical tools, transfusion bags, and other goods should be added in with the staples, raising the cost slightly, but rounding out your kit and allowing for more critical injuries to be cared for. Bulk over the counter medications, especially for stomach ailments, would be highly valuable post collapse, and can be bought wholesale. Medicinal teas, at least the organic brands, work very well! These can be bought for reasonable prices and will boost your immune system, preventing illness before it ever occurs.

Food Production

If you have enough land to keep them, a half dozen chickens, a half dozen breeding rabbits, and a goat, will produce milk, meat, and eggs daily, providing valuable sustenance, reducing the amount of stored foods you need to use in a day, and reducing the amount of time you have to spend hunting for food in a dangerous collapse environment. Chickens and goats practically feed themselves with whatever is available on your land. Rabbit feed is easy to store, and can also be made at home. These animals are indeed worth their weight in gold.
Seeds are, of course, a currency in and of themselves. Non-GMO seed and strong gardening knowledge will save you and your family. Gardening is not as easy as it seems, however. Extensive practice, trial and error, and an understanding of regional climates will improve your crop yields dramatically.
If you are looking to survive on the cheap and avoid paying thousands of dollars for years worth of freeze dried goods, sustainable food production is the only way to go. Foraging and scavenging is NOT a reliable alternative.

Security Systems

Trip wires and tin cans are certainly cheaper than thermal security cameras, and a few well trained guard dogs can put your mind at ease, but sometimes more silent or less obvious methods are in order. I would recommend the MURS radio and infrared alert system for perimeter defense. As far as force multipliers go, MURS is relatively inexpensive. MURS motion detectors are wireless, weather proof, have a beam range of around 100 ft, and can be placed up to 4 miles away from your radio base station. Intruders crossing the infrared beam will set off an alert on your base station and all MURS handheld radios. Some MURS systems even have underground probes designed to detect the movement of vehicles. Up to four motion censors can be linked to one base station and each can be designated for a sector, telling you exactly where on your property the intrusion is occurring. A full MURS system with multiple motion detectors can be had for $300 or less. Other comparable outdoor security systems often cost $500 or more.

Night Vision
The price range of night vision devices is truly staggering. Some can run as little as a few hundred dollars, others climb into the thousands. For the prepper with low cash flow who feels the need for night time security, a couple models offer good quality at a lower price. For typical surveillance and overwatch, the Bushnell 2.5 by 42 night vision monocular creates a strong image with quality construction for around $200.

For combat, the Yukon Nvmt Night Vision Scope offers many of the advantages of high end systems for only $350 or less.

Night vision may seem like an unnecessary expense, even at these prices, but any edge one can get in survival is a good thing. Being at a disadvantage monetarily does not mean you have to be at a disadvantage tactically.

Self Defense
Yes. Guns. Big-scary-guns. Guns and survival go hand in hand, especially during an economic or social collapse. To bring up guns in a prepping article almost always draws criticism of militancy and extremism from suburban basted over-privileged adolescent hippies who have read “Into The Wild” way too many times and think survival is about “communing with nature”. Sorry kids, but as much as I love nature, as soon as you turn your back on it, you end up a pre-digested meal spread like almond butter across 30 acres of grizzly valley.   On the other side of the coin, firearms analysis always draws endless opinions and puffy chested “expertise” from armchair generals and “invincible special-ops superheroes”.
Frankly, after years of survival writing, you stop caring what other people think. That said, for those of us with limited resources (of which I would include myself), firearms purchases are much less about technical proficiency and more about affordability.

I won’t be delving into sidearms here. Instead we’ll focus on what you cannot conceivably live without. Purchasing a primary battle rifle should always be the prepper’s first concern as far as firearms go, whether he is rich or poor. Semi-automatic, accurate, reliable, hard to damage, fires a common military caliber (.223, 7.62 by 39, .308). There’s your list. Finding cheap rifles that meet that list is another matter, but here are a few that come pretty close:

SAIGA

The Saiga is a high capacity AK variant that comes in all common military calibers as well as a 12 gauge shotgun model (I’m amazed it’s still legal). Works great, shoots straight, built tough, runs between $450 to $650. For the price, you can’t go wrong.

CETME

A Spanish made .308 semi automatic rifle with a similar design to the HK G3. Many in circulation have been pieced together with surplus parts, and it is wise to get yours checked out by a trusted gunsmith. A little tuning may be required. Otherwise, a pretty solid 300 yard gun running at $450 to $600.

FN FAL

The FAL is a Belgium made semi auto .308 rifle. Accurate and well made. Effective range of around 700 yards. Can be found for $600 to $800.

AK 47

Will you look like a terrorist holding this gun? Yes. But beyond that, the AK is synonymous with dependability, and affordability. Though gun prices the past few years have skyrocketed in ridiculous fashion, the AK 47, a 7.62 by 39 caliber rifle, can still be found for around $300 to $600 depending on the make, the age, and the honesty of your dealer. This is not a very accurate gun beyond 100 yards. Can you hit a man sized target beyond 100 yards with an AK? Yes. Can you do it accurately and consistently? No. You want pinpoint sniper accuracy from a Russian made weapon? Get a Dragunov. You want a close quarters weapon that you can clean with a dish rag and motor oil and still have it fire? Get an AK.

SKS

The SKS used to be a good deal. Four years ago you couldn’t spit without hitting one priced at around $200. Nowadays, many gunshops are fishing for $400 to $500. Do not pay this for any SKS. It is not a $500 gun. It is a $200 to $300 gun. Period. Deals can still be found if you are patient. The 7.62 by 39 rifle is relatively accurate and solidly built. The bayonet is a bit of a pain, but removing it is apparently an ATF no no. Technically you are required to remove the bayonet mounting lug and the grenade launcher attachment along with the blade for the gun to be legal (I’m not going to go into the absurdity of ATF assault rifle guidelines). Honestly, if you don’t like the bayonet, just take it off, and don’t let any of your ATF buddies shoot it at the range.

RUGAR MINI-14

Another rifle that used to be a good deal, now ruined by overenthusiastic gun shop owners. Private sale at a gun show is the only way lately to find this rifle at its traditionally suitable price of $350 to $450. Gun shops today will ask $600 to $800. The .223 rifle, designed after the M1 Garand, is light, easy to wield, and pretty accurate out to 300 yards. Lighter ammo means more rounds can be carried at a time.

Long Range Sniper Systems
For long range at an affordable price, you just can’t go wrong with Savage Arms. The company has maintained the great quality of its products, kept their prices low despite the Obama gun boom, and most of their rifles compete equally with guns twice as expensive. One issue to keep in mind, though, is optics, which can sometimes cost as much as the gun itself if you are not careful. Long range shooting platforms are essential for a small force defending against a larger or better supplied enemy. The more you can increase your standoff distance when at a disadvantage, the better chance you have of survival. One or two long range experts can wreak havoc on a seemingly unstoppable foe, making the cost of operations so high the enemy begins to question the practicality of moving forward. In collapse environments, snipers, amateur to professional, always come out of the woodwork to dominate the landscape. Preppers have the ability to counter this threat, and with very inexpensive firearms.

SAVAGE MODEL 10

This is a .308 sniper system commonly found with a precision stock and a heavy barrel. Range of around 800 yards. Can be found for $600 to $700. Modified systems come more expensive, but the standard model is all you need.

SAVAGE 111

A highly accurate rifle utilizing the effective 300 Win Mag cartridge. Range exceeding 1000 yards. Can usually be found for around $700.

SAVAGE 111 BA

The “long range hunter” model of the Savage 111 in .338 Lapua costing less than $1000. The .338 is an incredible cartridge with an effective range of about 1 mile. The Savage has been found comparable to sniper systems three times as expensive. The only problem with the .338 is the price of the ammo, which usually runs around $60 to $70 for a box of 20 rounds, almost twice as expensive as 300 Win Mag. Man, does that sting! This rifle should be considered a poor man’s substitute for the .50 Cal, a rifle that will always be undeniably expensive, considering one round usually sets you back $4 to $5. If you want the capability of a .50 Cal but not a quite so outrageous ammo price, the Savage is your best bet.

Procrastination Is Something We Cannot Afford
Preparation is not limited to the realm of the rich. Ultimately, survivalists with limited incomes must pursue their prepping MORE vigorously than those with expendable cash exactly because they are at a greater disadvantage. Being poor is no excuse for procrastination. Great gear can be had for little money, as long as purchases are approached intelligently. Budgeting for survival is not an enterprise for some future date in which we imagine ourselves to be better off than we are now. It should be a part of our daily life, even when times are tough.

Self discipline gets things done. Making a plan and then sticking to that plan despite our inner weaknesses and apprehensions gives greater returns in the long run. This method not only earns the respect we hold for ourselves, but also the respect others hold for us. The flaky and indecisive cannot be relied upon. The gravity of the socio-political situation we face in the near term demands that we shake off our fears and our apathy, step out of our baby cradle comfort zone, and MAKE THINGS HAPPEN. Backing out is not an option. Otherwise, we simply defeat ourselves, and we let each other down.

E.U. Collapse in 2012?

2011-11-28T17:43:00.000-08:00

Article Source

Will 2012 be the year that we see an economic collapse in Europe? Before you dismiss the title of this article as "alarmist", read the facts listed in the rest of this article first. Over the past several months, there has been an astonishing loss of confidence in the European financial system. Right now, virtually nobody wants to loan money to financially troubled nations in the EU and virtually nobody wants to lend money to major European banks. Remember, one of the primary reasons for the financial crisis of 2008 was a major credit crunch that happened here in the United States. This burgeoning credit crunch in Europe is just one element of a "perfect storm" that is rapidly coming together as we get ready to go into 2012. The signs of trouble are everywhere. All over Europe, governments are implementing austerity measures and dramatically cutting back on spending. European banks are substantially cutting back on lending as they seek to meet new capital requirements that are being imposed upon them. Meanwhile, bond yields are going through the roof all over Europe as investors lose confidence and demand much higher returns for investing in European debt. It has become clear that without a miracle happening, quite a few European nations and a significant number of European banks are not going to be able to get the funding that they need from the market in 2012. The only thing that is going to avert a complete and total financial meltdown in Europe is dramatic action, but right now European leaders are so busy squabbling with each other that a bold plan seems out of the question.
The following are 22 reasons why we could see an economic collapse in Europe in 2012....

#1 Germany could rescue the rest of Europe, but that would take an unprecedented financial commitment, and the German people do not have the stomach for that. It has been estimated that it would cost Germany 7 percent of GDP over several years in order to sufficiently bail out the other financially troubled EU nations. Such an amount would far surpass the incredibly oppressive reparations that Germany was forced to pay out in the aftermath of World War I.

A host of recent surveys has shown that the German people are steadfastly against bailing out the rest of Europe. For example, according to one recent poll 57 percent of the German people are against the creation of eurobonds.

At this point, German politicians are firmly opposed to any measure that would place an inordinate burden on German taxpayers, so unless this changes that means that Europe is not going to be saved from within.

#2 The United States could rescue Europe, but the Obama administration knows that it would be really tough to sell that to the American people during an election season. The following is what White House Press Secretary Jay Carney said today about the potential for a bailout of Europe by the United States....

"This is something they need to solve and they have the capacity to solve, both financial capacity and political will"

Carney also said that the Obama administration does not plan to commit any "additional resources" to rescuing Europe....

"We do not in any way believe that additional resources are required from the United States and from American taxpayers."

#3 Right now, banks all over Europe are in deleveraging mode as they attempt to meet new capital-adequacy requirements by next June.

According to renowned financial journalist Ambrose Evans-Pritchard, European banks need to reduce the amount of lending on their books by about 7 trillion dollars in order to get down to safe levels....

Europe’s banks face a $7 trillion lending contraction to bring their balance sheets in line with the US and Japan, threatening to trap the region in a credit crunch and chronic depression for a decade.

So what does that mean?
It means that European banks are going to be getting really, really stingy with loans.
That means that it is going to become really hard to buy a home or expand a business in Europe, and that means that the economy of Europe is going to slow down substantially.

#4 European banks are overloaded with "toxic assets" that they are desperate to get rid of. Just like we saw with U.S. banks back in 2008, major European banks are busy trying to unload mountains of worthless assets that have a book value of trillions of euros, but virtually nobody wants to buy them.

#5 Government austerity programs are now being implemented all over Europe. But government austerity programs can have very negative economic effects. For example, we have already seen what government austerity has done to Greece. 100,000 businesses have closed and a third of the population is now living in poverty.
But now governments all over Europe have decided that austerity is the way to go. The following comes from a recent article in the Economist....

France’s budget plans are close to being agreed on; further cuts are likely but will be delayed until after the elections in spring. Italy has yet to vote through a much-revised package of cuts. Spain’s incoming government has promised further spending cuts, especially in regional outlays, in order to meet deficit targets agreed with Brussels.

#6 The amount of debt owed by some of these European nations is so large that it is difficult to comprehend. For example, Greece, Portugal, Ireland, Italy and Spain owe the rest of the world about 3 trillion euros combined.
So what will massive government austerity do to troubled nations such as Spain, Portugal, Ireland and Italy? Ambrose Evans-Pritchard is very concerned about what even more joblessness will mean for many of those countries....

Even today, the jobless rate for youth is near 10pc in Japan. It is already 46pc in Spain, 43pc in Greece, 32pc in Ireland, and 27pc in Italy. We will discover over time what yet more debt deleveraging will do to these societies.

#7 Europe was able to bail out Greece and Ireland, but there is no way that Italy will be able to be rescued if they require a full-blown bailout.
Unfortunately, Italy is in the midst of a massive financial meltdown as you read this. The yield on two year Italian bonds is now about double what it was for most of the summer. There is no way that is sustainable.
It would be hard to overstate how much of a crisis Italy represents. The following is how former hedge fund manager Bruce Krasting recently described the current situation....

At this point there is zero possibility that Italy can refinance any portion of its $300b of 2012 maturing debt. If there is anyone at the table who still thinks that Italy can pull off a miracle, they are wrong. I’m certain that the finance guys at the ECB and Italian CB understand this. I repeat, there is a zero chance for a market solution for Italy.

Krasting believes that either Italy gets a gigantic mountain of cash from somewhere or they will default within six months and that will mean the start of a global depression....

I think the Italian story is make or break. Either this gets fixed or Italy defaults in less than six months. The default option is not really an option that policy makers would consider. If Italy can’t make it, then there will be a very big crashing sound. It would end up taking out most of the global lenders, a fair number of countries would follow into Italy’s vortex. In my opinion a default by Italy is certain to bring a global depression; one that would take many years to crawl out of.

#8 An Italian default may be closer than most people think. As the Telegraph recently reported, just to refinance existing debt, the Italian government must sell more than 30 billion euros worth of new bonds by the end of January....

Italy’s new government will have to sell more than EURO 30 billion of new bonds by the end of January to refinance its debts. Analysts say there is no guarantee that investors will buy all of those bonds, which could force Italy to default.
The Italian government yesterday said that in talks with German Chancellor Angela Merkel and French President Nicolas Sarkozy, Prime Minister Mario Monti had agreed that an Italian collapse “would inevitably be the end of the euro.”

#9 European nations other than just the "PIIGS" are getting into an increasing amount of trouble. For example, S&P recently slashed the credit rating of Belgium to AA.

#10 Credit downgrades are coming fast and furious all over Europe now. At this point it seems like we see a new downgrade almost every single week. Some nations have been downgraded several times. For instance, Fitch has downgraded the credit rating of Portugal again. At this point it is being projected that Portuguese GDP will shrink by about 3 percent in 2012.

#11 The financial collapse of Hungary didn't make many headlines in the United States, but it should have. Moody's has cut the credit rating of Hungarian debt to junk status, and Hungary has now submitted a formal request to the EU and the IMF for a bailout.

#12 Even faith in German debt seems to be wavering. Last week, Germany had "one of its worst bond auctions ever".

#13 German banks are also starting to show signs of weakness. The other day, Moody's downgraded the ratings of 10 major German banks.

#14 As the Telegraph recently reported, the British government is now making plans based on the assumption that a collapse of the euro is only "just a matter of time"....

As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.

Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.
The Treasury confirmed earlier this month that contingency planning for a collapse is now under way.

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

#15 The EFSF was supposed to help bring some stability to the situation, but the truth is that the EFSF is already a bad joke. It has been reported that the EFSF has already been forced to buy up huge numbers of its own bonds.

#16 Unfortunately, it looks like a run on the banks has already begun in Europe. The following comes from a recent article in The Economist....

"We are starting to witness signs that corporates are withdrawing deposits from banks in Spain, Italy, France and Belgium," an analyst at Citi Group wrote in a recent report. "This is a worrying development."

#17 Confidence in European banks has been absolutely shattered and virtually nobody wants to lend them money right now.
The following is a short excerpt from a recent CNBC article....

Money-market funds in the United States have quite dramatically slammed shut their lending windows to European banks. According to the Economist, Fitch estimates U.S. money market funds have withdrawn 42 percent of their money from European banks in general.
And for France that number is even higher — 69 percent. European money-market funds are also getting in on the act.

#18 There are dozens of major European banks that are in danger of failing. The reality is that most major European banks are leveraged to the hilt and are massively exposed to sovereign debt. Before it fell in 2008, Lehman Brothers was leveraged 31 to 1. Today, major German banks are leveraged 32 to 1, and those banks are currently holding a massive amount of European sovereign debt.

#19 According to the New York Times, the economy of the EU is already projected to shrink slightly next year, and this doesn't even take into account what is going to happen in the event of a total financial collapse.

#20 There are already signs that the European economy is seriously slowing down. Industrial orders in the eurozone declined by 6.4 percent during September. That was the largest decline that we have seen since the midst of the financial crisis in 2008.

#21 Panic and fear are everywhere in Europe right now. The European Commission’s index of consumer confidence has declined for five months in a row.

#22 European leaders are really busy fighting with each other and a true consensus on how to solve the current problems seems way off at the moment. The following is how the Express recently described rising tensions between German and British leaders....

The German Chancellor rejected outright Mr Cameron’s opposition to a new EU-wide financial tax that would have a devastating impact on the City of London.
And she refused to be persuaded by his call for the European Central Bank to support the euro. Money markets took a dip after their failure to agree.

Are you starting to get the picture?

The European financial system is in a massive amount of trouble, and when it melts down the entire globe is going to be shaken. But it isn't just me that is saying this. As I mentioned in a previous article, there are huge numbers of respected economists all over the globe that are now saying that Europe is on the verge of collapse.
For example, just check out what Credit Suisse is saying about the situation in Europe....

"We seem to have entered the last days of the euro as we currently know it. That doesn’t make a break-up very likely, but it does mean some extraordinary things will almost certainly need to happen – probably by mid-January – to prevent the progressive closure of all the euro zone sovereign bond markets, potentially accompanied by escalating runs on even the strongest banks."

Many European leaders are promoting much deeper integration and a "European superstate" as the answer to these problems, but it would take years to implement changes that drastic, and Europe does not have that kind of time.

If Europe experiences a massive economic collapse and a prolonged depression, it may seem like "the end of the world" to some people, but things will eventually stabilize. A lot of people out there seem to think that the global economy is going to go from its present state to "Mad Max" in a matter of weeks. Well, that is just not going to happen. The coming troubles in Europe will just be another "wave" in the ongoing economic collapse of the western world. There will be other "waves" after that.
Of course this current sovereign debt crisis could be entirely averted if the countries of the western world would just shut down their central banks and start issuing debt-free money.

The truth is that there is no reason why any sovereign nation on earth ever has to go a penny into debt to anyone. If a nation is truly sovereign, then the government has the right to issue all of the debt-free money that it wants. Yes, inflation would always be a potential danger in such a system (just as it is under central banking), but debt-free money would mean that government debt problems would be a thing of the past.

Unfortunately, most of the countries of the world operate under a system where more government debt is created when more currency is created. The inevitable result of such a system is what we are witnessing now. At this point, nearly the entire western world is drowning in debt.

There are alternatives to our current system. But nobody in the mainstream media ever talks about them.

So instead of focusing on truly creative ways to deal with our current problems, we are all going to experience the bitter pain of the coming economic collapse instead.

Things did not have to turn out this way.

Euro Collapse, prepare for riots--according to U.K. Foreign Office

2011-11-26T12:44:00.000-08:00

ARTICLE SOURCE
As every major developed economy hits Bass's Keynesian Endgame, the status quo is set to change dramatically. Nowhere is this climax playing out louder than in Europe and the implicit solution of Germany-uber-alles (while seemingly inevitable though nevertheless lengthy in execution) is likely to not sit well with many of the EMU nations. To wit, The Telegraph today reports that Britain's Foreign Office is advising its overseas embassies to draw up plans to help expats should the collapse of the Euro turn explosive. Almost incredibly, a senior minister has revealed that Britain is now planning on the basis that a euro collapse is matter of time.
The Telegraph: Prepare for riots in euro collapse, Foreign Office warns

British embassies in the eurozone have been told to draw up plans to help British expats through the collapse of the single currency, amid new fears for Italy and Spain.

As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.

Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.

The Treasury confirmed earlier this month that contingency planning for a collapse is now under way.

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

“It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told the Daily Telegraph.

Recent Foreign and Commonwealth Office instructions to embassies and consulates request contingency planning for extreme scenarios including rioting and social unrest.

Greece has seen several outbreaks of civil disorder as its government struggles with its huge debts. British officials think similar scenes cannot be ruled out in other nations if the euro collapses.

Diplomats have also been told to prepare to help tens of thousands of British citizens in eurozone countries with the consequences of a financial collapse that would leave them unable to access bank accounts or even withdraw cash.

Fuelling the fears of financial markets for the euro, reports in Madrid yesterday suggested that the new Popular Party government could seek a bail-out from either the European Union rescue fund or the International Monetary Fund.

There are also growing fears for Italy, whose new government was forced to pay record interest rates on new bonds issued yesterday.

The yield on new six-month loans was 6.5 per cent, nearly double last month’s rate. And the yield on outstanding two-year loans was 7.8 per cent, well above the level considered unsustainable.

Italy’s new government will have to sell more than EURO 30 billion of new bonds by the end of January to refinance its debts. Analysts say there is no guarantee that investors will buy all of those bonds, which could force Italy to default.

The Italian government yesterday said that in talks with German Chancellor Angela Merkel and French President Nicolas Sarkozy, Prime Minister Mario Monti had agreed that an Italian collapse “would inevitably be the end of the euro.”

The EU treaties that created the euro and set its membership rules contain no provision for members to leave, meaning any break-up would be disorderly and potentially chaotic.

If eurozone governments defaulted on their debts, the European banks that hold many of their bonds would risk collapse.

Some analysts say the shock waves of such an event would risk the collapse of the entire financial system, leaving banks unable to return money to retail depositors and destroying companies dependent on bank credit.

The Financial Services Authority this week issued a public warning to British banks to bolster their contingency plans for the break-up of the single currency.

Some economists believe that at worst, the outright collapse of the euro could reduce GDP in its member-states by up to half and trigger mass unemployment.

Analysts at UBS, an investment bank earlier this year warned that the most extreme consequences of a break-up include risks to basic property rights and the threat of civil disorder.

“When the unemployment consequences are factored in, it is virtually impossible to consider a break-up scenario without some serious social consequences,” UBS said.

Will the financial system collapse? The EU collapse? America collapse?

2011-11-21T19:01:00.000-08:00

Article Source

Is the world on the verge of another massive global financial collapse? Yes. The western world is drowning in an ocean of debt unlike anything the world has ever seen before, and our financial markets are gigantic casinos that are dependent on huge mountains of risk and leverage remaining very stable. In the end, this house of cards that has been built on a foundation of sand is going to come crashing down in a horrifying manner. Usually in this column I go on and on about why things will soon get much worse. But today I am going to take a bit of a break. Today, I am going to let some of the top financial professionals in the world tell you why things will soon get much worse.

Many of the quotes that you are about to read just might make the hair on the back of your neck stand up. Most people out there have no idea what is about to happen. Most people out there are working hard and are busy preparing for the holidays and they are hopeful that the economy will turn around soon. But that is not going to happen. We are heading for another major global financial collapse, and when it happens the U.S. economy is going to get even worse.

The epicenter for the coming global financial collapse is almost certainly going to be in Europe. As you will see below, financial professionals all over the world are sounding the alarm about Europe. It is a disaster that everyone can see coming but that nobody seems to be able to prevent.

Of course the failure of the "supercommittee" in the United States certainly is not helping matters. There is already talk that we may soon see another downgrade for U.S. debt. It is hard to even describe how incompetent the U.S. Congress is.
There is a tremendous lack of leadership both in the United States and in Europe right now. The financial world is more interconnected than ever before, and when the financial dominoes start to fall it is going to take a miracle to keep a complete and total disaster from unfolding.

So when the time comes, who is going to step forward and provide that leadership?
That is a really, really good question.

Right now, panic and fear are spreading like wildfire in the financial world and nobody knows for sure what is going to happen next.

But one thing is for certain. Pessimism is growing stronger by the day.
The following are 17 quotes about the coming global financial collapse that will make your hair stand up....

#1 Credit Suisse's Fixed Income Research unit: "We seem to have entered the last days of the euro as we currently know it. That doesn’t make a break-up very likely, but it does mean some extraordinary things will almost certainly need to happen – probably by mid-January – to prevent the progressive closure of all the euro zone sovereign bond markets, potentially accompanied by escalating runs on even the strongest banks."

#2 Willem Buiter, chief economist at Citigroup: "Time is running out fast. I think we have maybe a few months -- it could be weeks, it could be days -- before there is a material risk of a fundamentally unnecessary default by a country like Spain or Italy which would be a financial catastrophe dragging the European banking system and North America with it."

#3 Jim Reid of Deutsche Bank: "If you don't think Merkel's tone will change then our investment advice is to dig a hole in the ground and hide."

#4 David Rosenberg, a senior economist at Gluskin Sheff in Toronto: "Lenders are finding it difficult to finance their day-to-day operations with short-term funding. This is a lot like 2008 but with more twists."

#5 Christian Stracke, the head of credit research for Pimco: "This is just a repeat of what we saw in 2008, when everyone wanted to see toxic assets off the banks’ balance sheets"

#6 Paul Krugman of the New York Times: "At this point I’d guess soaring rates on Italian debt leading to a gigantic bank run, both because of solvency fears about Italian banks given a default and because of fear that Italy will end up leaving the euro. This then leads to emergency bank closing, and once that happens, a decision to drop the euro and install the new lira. Next stop, France."

#7 Paul Hickey of Bespoke Investment Group: "More and more, we are hearing anecdotal comments from individual and professionals that this is the most difficult environment they have ever experienced as the market is like a fish flopping around after being taken out of the water."

#8 Bob Janjuah of Nomura International: "Germany appears to be adamant that full political and fiscal integration over the next decade (nothing substantive will happen over the short term, in my view) is the only option, and ECB monetisation is no longer possible. I really think it is that clear and simple. And if I am wrong, and the ECB does a U-turn and agrees to unlimited monetisation, I will simply wait for the inevitable knee-jerk rally to fade before reloading my short risk positions. Even if Germany and the ECB somehow agree to unlimited monetisation I believe it will do nothing to fix the insolvency and lack of growth in the eurozone. It will just result in a major destruction of the ECB‟s balance sheet which will force an ECB recap. At that point, I think Germany and its northern partners would walk away. Markets always want short, sharp, simple solutions."

#9 Dan Akerson, CEO of General Motors: "The ’08 recession, which was a credit bubble that manifested itself through primarily the real estate market, that was a serious stress....This is much more serious."

#10 Francesco Garzarelli of Goldman Sachs: "Pressures on Euro area sovereign bond markets have progressively intensified and spread like a wildfire."

#11 Jim Rogers: "In 2002 it was bad, in 2008 it was worse and 2012 or 2013 is going to be worse still – be careful"

#12 Dr. Pippa Malmgren, the President and founder of Principalis Asset Management who once worked in the White House as an adviser to President Bush: "Market forces are increasingly determining what the options are and foreclosing on options policymakers thought they had. One option which is now under discussion involves permitting a country to temporarily leave the Euro, return to its native currency, devalue, commit to returning to the Euro at a better debt to GDP ratio, a better exchange rate and a better growth trajectory and yet not sacrifice its EU membership. I would like to say for the record that this is precisely the thought process that I expected to evolve,but when I proposed this possibility back in 2009, and again in September 2010, I had a 100% response from clients and others that this was “impossible” and many felt it was “ridiculous”. They may be right but this is the current state of the discussion. The Handelsblatt in Germany has reported this conversation, but wrongly assumes that the country that will exit is Germany. I think that Germany will have to exit if the Southern European states do not. Germany’s preference is to stay in the Euro and have the others drop out. The problem has been the Germans could not convince the others to walk away. But, now, market pressures are forcing someone to leave. Germany is pushing for that someone to be Italy. They hope that this would be a one off exception, not to be repeated by any other country. Obviously, though, if Italy leaves the Euro and reverts to Lira then the markets will immediately and forcefully attack Spain, Portugal and even whatever is left of the already savaged Greeks. These countries will not be able to compete against a devalued Greece or Italy when it come to tourism or even infrastructure. But, the principal target will be France. The three largest French banks have roughly 450 billion Euros of exposure to Italian debt. So, further sovereign defaults are certainly inevitable, but that is true under any scenario. Growth and austerity will not do the trick, as ZeroHedge rightly points out. Ultimately, I will not be at all surprised to see Europe’s banking system shut for days while the losses and payments issues are worked out. People forget that the term “bank holiday” was invented in the 1930’s when the banks were shut for exactly the same reason."

#13 Daniel Clifton, a policy strategist with Strategas Research Partners on the potential for more downgrades of U.S. debt: "We would expect further downgrades, a first downgrade from Moody’s and Fitch and possibly a second downgrade from S&P."

#14 Warren Buffett on the problems in the eurozone: "The system as presently designed has revealed a major flaw. And that flaw won’t be corrected just by words. Europe will either have to come closer together or there will have to be some other rearrangement because this system is not working"

#15 David Kostin, equity strategist for Goldman Sachs: "The wide range of possible outcomes on both the super committee process and the unstable political economy in Europe drives our view that investors should assume the worst while hoping for the best."

#16 Mark Mobius, the head of the emerging markets desk at Templeton Asset Management: "There is definitely going to be another financial crisis around the corner"

#17 Gerald Celente, founder of The Trends Research Institute: "The whole system is going down. Pull your money out your Fidelity account, your Scwhab accout, and your ETFs."

Are you starting to get the picture?

When so many top financial professionals are freaking out like this, perhaps the rest of us should start paying attention.

They are telling us that "time is running out".

They are telling us that "there is definitely going to be another financial crisis".

They are telling us that this "is going to be worse" than 2008.

They are telling us that "the whole system is going down".

Yes, a devastating financial collapse really is coming. Just like in 2008, it will seem like the "end of the world" while it is happening, but it won't be. It will severely damage our financial system and our economy, but it will not finish us off.
Think of it this way. When you build a sand castle at the beach, it doesn't get totally wiped out by the first wave or the second wave that hits it. Each wave does significant damage, but the destruction of your sand castle is a process.

It is the same thing with the U.S. economy. We once had the most incredible economic machine that the world has ever seen. It is constantly being gutted and the financial crisis of 2008 hit us really hard, but we are still doing okay. After this next financial crisis we will be in even worse shape. But we will still be breathing. More "waves" will come after this next financial crisis. If we continue on the road that we are on, our economy will progressively get worse and worse.

Not everyone will agree with this analysis, and that is okay. In the end, time will reveal the truth to all of us.
Right now, we all need to get ready for the next wave that is about to hit us. A lot of people are going to lose their jobs over the next few years. Hopefully you are prepared for that.

If Euro Collpases, what comes after the E.U....Germany has a plan?

2011-11-17T17:25:00.000-08:00

It would seem that leaders in Germany have laid down a secret contingency plan for hostile economic takeovers of sovereign members of the EU.

And what could possibly go wrong with that? Besides, of course, a failed Viennese artist with a tiny mustache, a world war, and tens of millions dead?

[A] leaked memo, written by the German foreign office, discloses radical plans for an intrusive new European body that will be able to take over the economies of beleaguered eurozone countries.
It discloses that the EU’s largest economy is also preparing for other European countries, which are too large to be bailed out, to default on their debts — effectively going bankrupt. It will prompt fears that German plans to deal with the eurozone crisis involve an erosion of national sovereignty that could pave the way for a European “super state” with its own tax and spending plans set in Brussels...

...The eurozone contagion is threatening to spread to Spain and France... The six-page German foreign ministry paper sets out plans for the creation of a European Monetary Fund with a transfer of sovereignty away from member states.

The fund will have the power to take ailing countries into receivership and run their economies. Even more controversially, the document, entitled The future of the EU: required integration policy improvements for the creation of a Stability Union, declares that the treaty changes are a first stage “in which the EU will develop into a political union”. “The debate on the way towards a political union must begin as soon as the course toward stability union is charted,” it concludes.

The EU is dead: its leaders just refuse to acknowledge what everyone else in the world knows. It allowed countries to violate their terms of membership, it facilitated outrageous amounts of debt, and it helped promote the contamination of the entire world financial system.

The fuse was lit long ago. The only question is how many weeks (not months) it will all take to implode.

Article Source

Nouriel Roubini discusses collpase of E.U.

2011-11-03T18:35:00.000-07:00

Nouriel Roubini is one of the few noted economists who predicted the 2008 financial disaster. Well in light of the current troubling economic issues he has some new thoughts. Read, research, and decide for yourself...

SOURCE
Nouriel Roubini held a party/lecture at his apartment exclusively for clients (many of them hedge funders) of his firm Roubini.com.

He spent about 30 minutes discussing the big issues of the day: The US economy, China, and of course, the biggie, the Eurozone crisis.

Here's the gist of what he told them.

When it comes to Europe, frankly, he said, "Our view is very bearish." Europe is a slow motion train wreck and there's a "significant risk of a Eurozone breakup." This doesn't mean Greece and Portugal leaving, it means Spain and Italy ultimately leaving as well, which would mean the whole thing is toast.

And if the Eurozone breaks up "everything around the world goes sour."

The fundamental problem -- which is something he laid out in a note to clients this week -- the matter of flows. While Europe might be able to address some "stock" problems (the size of the debt), there's no answer to the matter of growth and trade deficits, which the periphery countries are consistently running.

So the basic strategy of the IMF/Germany is this: Keep Greece on life support long enough for a big bazooka to save Italy and Spain, at which point, when it's obvious that austerity doesn't work (which everyone knows) then, perhaps in a year from now, you let Greece default. The hope is that Spain and Italy are okay by then. Roubini is, not surprisingly, skeptical.

There's only one strategy that might work: Periphery reforms and the core engages in fiscal stimulus and more monetary easing, in which case you might get the kind of balanced adjustment that would work. But the problem, of course, is German culture, which is against monetary easing and more fiscal stimulus.

As for the US, he thinks people are breaking out the kool-aid to soon on the avoidance of a recession. "Q3 GDP will be revised downward," he explained because the first estimate only looks at big firms, which are doing better than small and medium sized businesses that are "getting squeezed."

So supposed Q3 GDP gets revised down to a rate closer to 1.5%, then next year we experience a $200 billion fiscal drag: "That
will bring growth to zero."

And of course, "If the Eurozone blows up, it all gets worse."

Finally on China, he predicts it avoids a hard landing this year and next year, but sees trouble in 2013-2014.
Ultimately it will end in pain for three reasons:

A buildup of non-performing loans at the banks.
A high level of government debt (when you include municipalities)
And finally every single case of a country that boomed via a huge fixed-asset stimulus ends up in a hard landing, ultimately.

European Bailout? There is a hole in the bucket

2011-10-28T19:03:00.000-07:00

ARTICLE SOURCE
Once the euphoria of the initial announcement faded and as people have begun to closely examine the details of the European debt deal, they have started to realize that this "debt deal" is really just a "managed" Greek debt default. Let's be honest - this deal is not going to solve anything. All it does is buy Greece a few months. Meanwhile, it is going to make the financial collapse of other nations in Europe even more likely. Anyone that believes that the financial situation in Europe is better now than it was last week simply does not understand what is going on. Bond yields are going to go through the roof and investors are going to start to panic. The European Central Bank is going to have an extremely difficult time trying to keep a lid on this thing. Instead of being a solution, the European debt deal has brought us several steps closer to a complete financial meltdown in Europe.

The big message that Europe is sending to investors is that when individual nations get into debt trouble they will be allowed to default and investors will be forced to take huge haircuts.
As this reality starts to dawn on investors, they are going to start demanding much higher returns on European bonds.
In fact, we are already starting to see this happen.
The yield on two year Spanish bonds increased by more than 6 percent today.
The yield on two year Italian bonds increased by more than 7 percent today.
So what are nations such as Italy, Spain, Portugal and Ireland going to do when it costs them much more to borrow money?
The finances of those nations could go from bad to worse very, very quickly.
When that happens, who will be the next to come asking for a haircut?
After all, if Greece was able to get a 50% haircut out of private investors, then why shouldn't Italy or Spain or Portugal ask for one as well?
According to Reuters, German Chancellor Angela Merkel is already trying to warn other members of the EU not to ask for a haircut....

Chancellor Angela Merkel said on Friday it was important to prevent others from seeking debt reductions after European Union leaders struck a deal with private banks to accept a nominal 50 percent cut on their Greek government debt holdings.
"In Europe it must be prevented that others come seeking a haircut," she said.

But investors are not stupid. Greece was allowed to default. If Italy or Spain or Portugal gets into serious trouble it is likely that they will be allowed to default too.
Investors like to feel safe. They want to feel as though their investments are secure. This Greek debt deal is a huge red flag which signals to global financial markets that there is no longer safety in European bonds.
So what is coming next?
Hold on to your seatbelts, because things are about to get interesting.
Around the globe, a lot of analysts are realizing that this European debt deal was not good news at all. The following is a sampling of comments from prominent voices in the financial community....
*Economist Sony Kapoor: "The fact that a deal has been agreed, any deal, impresses people. Until they start de-constructing it and parts start unravelling."
*Economist Ken Rogoff: "It feels at its root to me like more of the same, where they’ve figured how to buy a couple of months"
*Neil MacKinnon of VTB Capital: "The best we can say is that the EU have engineered a temporary reprieve"
*Graham Summers of Phoenix Capital Research:

First off, let’s call this for what it is: a default on the part of Greece. Moreover it’s a default that isn’t big enough as a 50% haircut on private debt holders only lowers Greece’s total debt level by 22% or so.
Secondly, even after the haircut, Greece still has Debt to GDP levels north of 130%. And it’s expected to bring these levels to 120% by 2020.
And the IMF is giving Greece another $137 billion in loans.
So… Greece defaults… but gets $137 billion in new money (roughly what the default will wipe out) and is expected to still be insolvent in 2020.

*Max Keiser: "There will be another bailout required within six months - I guarantee it."
The people that are really getting messed over by this deal are the private investors in Greek debt. Not only are they being forced to take a brutal 50% haircut, they are also being told that their credit default swaps are not going to pay out since this is a "voluntary" haircut.
This is completely and totally ridiculous as an article posted on Finance Addict pointed out...

We now know that private holders of Greek bonds will be “invited” (seriously–this was the word used in the EU summit statement) to take a write-down of 50%–halving the face value of the estimated $224 billion in bonds that they hold. This will help bring the Greek debt-to-GDP ratio down from 186% in 2013 to 120% by 2020. The big question–apart from how many investors they will get to go along with this, given that they couldn’t reach their target of 90% investor participation when the write-down was only going to be 21%–is whether this will trigger a CDS pay-out.
That this is even up for discussion is mind-boggling. These credit default swaps are meant to be an insurance policy in case Greece doesn’t pay the agreed upon interest and return the full principal within the agreed timeframe. If they don’t pay out when bondholders are taking a 50% hit then what’s the point?

European politicians may believe that they have "solved" something, but the truth is that what they have really done is they have pulled the rug out from under the European financial system.
Faith in European debt is going to rapidly disappear and the euro is likely to fall like a rock in the months ahead.
The financial crisis in Europe is just getting started. 2012 looks like it is going to be an extremely painful year.
Let us hope for the best, but let us also prepare for the worst.

The E.U. financial crisis, How the dominoes fall in Europe

2011-10-23T11:32:00.000-07:00

Article SOURCE
The dominoes of debt are toppling in Europe, and there is no way to stop the forces of financial gravity.
After 19 months of denial, propaganda and phony fixes, the political and finance leaders of the European Union are claiming a "comprehensive solution" will be presented by Wednesday, October 26 — or maybe by the G20 meeting on November 3, or maybe on Christmas, when Santa Claus delivers the gift global markets are demanding: a "solution" that actually pencils out and that forces monumental writeoffs of debt and thus equally monumental losses on European banks and bondholders.
There have been any number of insightful descriptions of what's going on beneath the artifice, spin and lies, for example:
Four Facts that PROVE the EFSF (rescue fund) Doesn’t Matter At All (Zero Hedge)

Revised Troika Forecast Sees Total Greek Debt-To-GDP Peaking At 186%: Here Is What Happens Next

There Is No Bailout Spoon: The Math Behind The €2 Trillion EFSF Reveals A "Pea Shooter" Not A "Bazooka" (Zero Hedge)

Citi Expects A 76% Haircut On Greek Debt (Zero Hedge)

EU Bank Stress Test: When No. 1 Financial-Strength Ranking Spells Doom (Bloomberg)

I have summarized the fundamentals in this one graphic: the European dominoes of debt. Simply put, there is no way the EU authorities can stop the first domino — Greek default or equivalent write-down of its impossible debt load — from toppling the over-leveraged banks which will be rendered insolvent when forced to recognize their losses.

That leaves each nation with the politically unsavory option of bailing out its premier banks with taxpayer money, and squeezing the money out of its citizenry via higher taxes and austerity. That assumption of bank debt will in turn trigger downgrades of heavily indebted sovereign nations such as France — moves that will raise rates and make the bailout even more costly to taxpayers, who will also be suffering from reductions of income due to global recession.

Once the banks and bondholders accept a 50%–75% writedown in Greek debt, then the other debtor nations will be justified in demanding the same writedown in their crushing debts. This dynamic leads to estimates that 3 trillion euros will be needed to bail all the players out. Alternatively, total losses will equal 3 trillion euros, wiping out banks and bondholders of sovereign debt.

The German economy is simply not big enough to fund a 3 trillion-euro bailout. Germany has 81 million people and its GDP is $3.3 trillion; the EU GDP is roughly $16 trillion. Compare those with the U.S., with 315 million people and a GDP of around $14.6 trillion.

As an act of self-preservation, Germany will be forced to either exit the euro outright or cloak its withdrawal with a "euro 1 and euro 2" scheme, a scenario I first laid out in March 2010: Why the Euro Might Devolve into Euro1 and Euro2 (March 2, 2010). Other recent entries on the end-state of the European debt crisis:

The Eurozone's Three Fatal Flaws (September 21, 2011)

The Dynamics of Doom: Why the Eurozone Fix Will Fail (July 25, 2011)

Why The European Union Is Doomed (March 28, 2011)

In any event, the last domino — the artifice of a single currency — will fall one way or another.

It's important to understand that the supposedly "prudent" economies of France, Germany, South Korea and Canada are just as heavily indebted as the U.S. or "drowning in debt" nations such as Italy. In the long view, is Germany's load of 284% of GDP really that different from Italy's 313%? Yes, the mix of debt is different, but the point is that all of Europe, and indeed the developed world, is overloaded with debt: state, bank and private.

The idea that leveraging more debt can resolve this gargantuan over-indebtedness is beyond absurd. (Source: BusinessWeek)

...and that is post 100.

I am doing my best to give you information from sources you may not see or read ordinarily and tossing in my own thoughts here and there.

In all seriousness, I can't tell you what will happen, IF anything will happen, or what to do IF something happens. My COLLAPSE RPG is meant as a tool to explore potential Collapse scenarios or issues in a safe way, so read it and use it! Download it for FREE in the Department of Intelligence logo box to your right! If I can offer any advice:

YOU have to be in control of your own life and your decisions!

YOU are responsible for warning, preparing and taking care of your family and friends!

YOU can elect to wait, and hope, and expect governments to somehow make everything okay IF something happens.

YOU will also be responsible for the results of that wait and see plan. I'd like to point out Katrina as a history lesson for those who wait and ignore warnings of trouble ahead.

YOU need to read, research, consider, and then plan for whatever eventuality YOU think is coming, if indeed any trouble is coming.

Take a look at all the warning signs around you like NASA warning employees, CDC using a zombie survival theme to get you to prepare, emergency testing over the whole country, websites like mine trying to bring you warning information. I think something is wrong and trouble is ahead, but YOU have to decide for yourself.

STAY AWAY from folks who preach violence, STAY AWAY from those who want dismissal of the Constitution and its restraints on government, and STAY AWAY from those who seek the overthrow of the government. These are people attempting to use you for their own ends to gain power: see the Occupy groups in the U.S. for an example of how bad this sort of movement can be.

As the Boy Scout motto has warned you for ages, BE PREPARED!

Greece Collapsing? EU Collapsing? U.S. preparing for what exactly?

2011-10-23T06:48:00.000-07:00

There is a lot going on in the world right now and none of it is good. Read, think about it, and the decide for yourself whether its something, or nothing...

1) Greece is on the edge of collapse
2) Europe and the IMF can't make a deal to save the Euro (at least yet)
3) Germany's Merkel warns Italy..and the U.S. to get things put straight
4) And when one member nation is too big to fail, the way out (at least according to the E.U.) is to get bigger!

Lest you think gentle reader, "well, that's Europe I mean who cares?" Let's look to our own troubles in the U.S.:

5) The U.S. government (via EAS) is going to test a complete take over of radio and T.V. on November 9th.
6) Homeland Security is setting up random checkpoints on highways now in Tennessee
7) There is rumor circulating of another U.S. credit downgrade--this year.
8) And what happens if Europe falters? Trouble with the Wall Stree Occupiers-and for our economy According to this guy, nothing good...

From his article

So listen closely to his “7 Major Advance Warnings,” which are “the most important in the 40-year history of my company.” Many will dismiss them, distracted by today’s campaign noise. Others will dismiss them as “over there,” problems for Europeans. Weiss warns: EU banks problems are “bound to have a life-changing impact on nearly all investors in the U.S. and around the globe.”

So listen and discount what Wall Street is selling you. Protect your portfolio. Here are edited highlights:

1. Greece will default very soon ...

”Banks must bite the bullet and take some big hits in their Greek loans. … Whether banks accept this ‘solution’ voluntarily or not, it will mean Greece is in default.”

2. The contagion of fear will spread …

Global investors know “if one major Western government can default, so can others.” They will refuse to lend “to highly indebted governments” or “demand outrageously high yields.”

3. European megabanks will collapse …

Some of the “largest banks will collapse under the weight of defaulting sovereign debts and … mass withdrawals … Spain … French banks” … the impact will ripple across “J.P. Morgan Chase, Bank of America and Citigroup … All three are in danger.”

4. EU governments suffer new credit rating downgrades ...

”France and Germany, will scramble to rescue their failing banks.” But “bank bailouts are seriously flawed” as “governments gut their own fiscal balance … suffer big downgrades,” or pay “far higher interest rates.”

5. Spain and Italy next to face default on their massive debts ...

With “$3.4 trillion in debt, or about 10 times more than Greece” they too risk default.

6. Global debt markets will suffer a critical meltdown ...

Anticipating “default by a country as large as Spain or Italy, nearly all debt markets in the world will freeze.” Withdrawals, panic “not only crush the borrowing power of the PIIGS” but threaten meltdowns in “France, Germany, Japan, the U.K. and the U.S.”

7. Vicious cycle: sovereign defaults, bank failures, global depression ...

Government defaults trigger more bank failures, “cut off the flow of credit to businesses and households, sink the global economy into a depression, and perpetuate the vicious cycle.”

Warning to investors: No bank bailouts, power to Occupation

History inevitably repeats itself: Arab Spring triggered Wall Street Fall. Next, the raging European monetary collapse will ripple through America’s banking system, completing the 2008 meltdown that never ended because Wall Street fought all reforms.

But now, a bigger meltdown as history repeats a dangerous cycle like the 1929 Crash and Great Depression.

History will also deal a fatal blow to Wall Street. Weiss adds a key warning: No bank bailouts. America’s banking system is bankrupt, structurally and morally. Washington is broken. And thanks to the Occupiers Revolution the masses will never accept new bank bailouts. Never. They’ll toss politicians and overthrow government first.

No new bailouts will be the stake in the heart of Wall Street, ending the “greed is good” power of America’s “bloodsucking vampire squid,” handing the Occupiers new political power in Washington.

Weiss’s worst-case scenario highlights everything we’ve both been warning investors about for a long time. The 2008 meltdown never ended, lessons never learned. But now the end game is accelerating.

Listen closely: Weiss final warning to all investors: “Get all or most of your money out of danger immediately … above all, stay safe!” Prepare for the coming bank collapse. And discover how this historic scenario will empower the Occupiers message to get money out of elections:

“One citizen. One dollar. One vote.”

Compromise on that principle and Wall Street wins, again.

Collapse of Greece, EU no longer able to kick the can down the road...

2011-10-17T20:05:00.000-07:00

SOURCE
It looks like the European bankers' can-kicking just ran out of road. The yield on a one-year bond from the country of Greece hit a new record high earlier today.

A yield of 172% means that bonds issued by Greece are worth just a few pennies more than the paper they're printed on. Put another way, Greece is dead bang certain to default on its debt.

European banks loaned Greece hundreds of billions of Euros -- the reasons don't matter at this point -- and were issued bonds in exchange for the money. The money's gone, spent on heaven knows what. And Greece is bankrupt, trying to make ends meet by laying off its bloated public sector union bureaucracy. That's why riots are occurring there on a near-daily basis.

Germany is considered the bulwark of the European banking system. But even Germany's most august financial institutions are up to their eyeballs in bad debt. For instance, Deutsche Bank alone has Є3.6 billion of debt issued by Greece (PDF).

Greece owes its creditors an amount equal to 162 percent of its entire gross domestic product (GDP, or the annual output of its economy). Without repealing the laws of mathematics (or Paul Krugman's alien invasion force dropping gold bars on Athens), there is no possible way this debt can be paid off.

The reason for the crisis boils down to this: the banks know they are going to take a horrific beating on their crappy investments (like debt issued by Greece). And they are doing everything possible to avoid recognizing those write-downs, because they do not have the requisite capital to continue operating normally if they do. Deutsche Bank's CEO, for example, is reported to be fighting even a 50% "haircut" (loss) on the Greek debt. But knowledgeable analysts say that a 50% markdown won't be nearly enough.

Worse still, there is the real possibility of "contagion". German banks aren't the worst offenders when it comes to exposure to Greece. French banks are in terrible shape, despite today's protestations by the governor of the Bank of France that "all is well". French institutions have suffered a series of downgrades over the past several months as their vulnerabilities became more evident. That is, to everyone except the governor of the Bank of France.

Oh, but I haven't even gotten to the worst part. Greece is only the beginning of Europe's debt insanity:

European banks have total exposure of $998.7 billion to Italy, $774 billion to Spain and $532 billion to Ireland versus just $162.4 billion to Greece.

Talk of a rescue package for Greece -- which hasn't yet been finalized because no one wants to pony up -- doesn't even contemplate much larger defaults like those of Spain and Italy. Yields on Italian 10-year bonds are now nearing the deadly 6 percent mark, which signal weakening confidence in that country's ability to make good on its debts.

Riots are underway in Italy this week to protest the government's handling of the financial crisis.

This is only the beginning of the shakeout. The worst has yet to unfold.

Rome is burning...Euro unrest spreads...America soon to Collapse?

2011-10-15T08:33:00.000-07:00

Rome is burning SOURCE:
Two months ago we suggested that as part of the transition of austerity's center from Greece to Rome, we would soon see the launch of "The Piazza Navona Strike Cam." Close enough: as of this afternoon local time, Rome is literally burning, as expected yesterday when we covered the most recent events in Milan. From the Telegraph: "Demonstrators in Rome set fire to two cars and broke shop windows during a protest in the Italian capital, as activists organised a series of rallies in 82 countries. Inspired by the Occupy Wall St movement and Spain's "Indignants", demonstrators from Asia to Europe took to the streets. Riot police in Rome charged hundreds of protesters and fired water cannons, while a group of activists set alight a defence ministry annex nearby. Flames could be seen coming out of the roof and windows of the building on Via Labicana as firefighters struggled to tame the blaze. Dozens of masked protesters could be seen in the area, which had not been cordoned off. The violence was said to be caused by hooded militants known as "black blocks," who have infiltrated demonstrations in the past. There were no immediate reports of injuries. Television images showed one of the cars in flames and spewing thick black smoke over the route of the demonstration, which was otherwise peaceful." Whether due to a subversive group, or representative or broader pent up anger, increasingly more people are waking up to the fact that the current system does not work and needs a reset.

Alas, for the "resistance movement" to be truly effective, things will have to deteriorate far more, and the welfare state structure will have to be truly on its last breath. As long as the status quo can dangle promises of (completely insolvent) pension benefits and retirement plans to the 99%, all of "this" is mostly for show.

American Collapse? COMMENTARY SOURCE:

Through the ages, nations and cultures of spectacular proportion and prominence have risen to prosperity, and fallen to chaos, on very particular and fundamental principles. In some cases, these great and terrible declines have taken centuries to culminate (as was the story of the Roman Empire), and only a few years in others (the Soviet Union comes to mind). In every example of societal destabilization, however, there were many signs of danger long before the final plunge; some unique to each particular culture, and some common to all. One of the most enduring and frightening similarities between crumbling nations is an overwhelming belief amongst the people that they have somehow “advanced” beyond the need for concern. Each self-destructing society presumed itself invincible. Each country thought itself the pinnacle of human potential, only to discover yet again that in abandoning or subverting the principles of freedom, and the bedrock pillars of conscience, reason, and wisdom, they had become merely another footnote in a long marathon of footnotes.

Ultimately, the vast and sordid history of collapse could be summarized simply as a series of breaking points; moments at which opposing ideals and forces hyperextend the prevailing mechanics of a system, changing it entirely.

Some of these events have produced surprising strides of understanding and political progress, as prevailed after the American Revolution. Others led to dark and mindless collectivist nightmares that fog men’s eyes and hearts, as that which occurred after the Bolshevik Revolution in Russia. The difference is one of focus. Imperialist (elitist) ideologies were deemed unacceptable in both revolutions, but the tides of each conflict leaned towards entirely separate values. Individual liberty in the West, and collective safety and sacrifice in the East. In America, the uprising was led by common men and the target was clear. In Russia, the uprising was led by elitists posing as common men, and the target was obscured. In America, much of the public assumed roles as arbiters and political engineers. In communist Russia, much of the public was oblivious to such responsibility, and only subject to engineering. Two revolutions in the name of ending tyranny with two entirely different initial outcomes…

I bring up these opposing paradigms not to spark another endless debate over the merits of communism versus capitalism, but to highlight a growing potential for a new brand of revolution in modern day America, now cutting through the surface, which may very well culminate in one of the two finales described above. More perhaps than any other time memorable, centralist and statist visions are today clashing with individualist and Constitutionalist pleadings for sanity. The air grows heavy and ripe for ignition. More even than any economic indicator, social indicators point in the direction of conflict and widespread malfunction. The question of “if” in terms of citizen dissent and the inevitable lashing response of government is no longer asked. Now, the question of “when” has risen to the surface.

To predict the exact timing of a breaking point is impossible, but there are signals to watch for; social and political attitudes to monitor and examine. After analyzing the shifts of multiple nations and cultures over thousands of years of human record, a pattern does, indeed, emerge. Similar developments in our times should not be taken lightly…

1) The Rise Of Moral Relativism

Inherent conscience is a vital artery to a healthy society. When that artery is cut, entire structures and peoples die. There is no way around this, as history has shown. Cynics, often utilizing a highly limited understanding of the processes of mass psychology and individual psychology, tend to confuse the word “conscience” with the concept of taboo. Taboos are man-made morals, and are commonly applied as a method of social control by oligarchs and collectives, just as many laws are created to appease sometimes dubious bureaucracies. Conscience is NOT man-made, but an inborn process that human beings draw from unconsciously, and which true honor, compassion, and sincerity are derived. Conscience is an intuitive product, not intellectual.

Moral relativism, by comparison, is a kind of emotional inhibitor which allows people to mechanize their thinking, and rationalize any activity no matter how despicable, as long as that activity is rooted in a “logical” framework. Logic, however, is limited…

Interestingly, there are some forms of theoretical mathematics which allow false conclusions to be presented as fact, and this same methodology of fuzzy logic is consistently used by moral relativists to achieve the “appearance” of reason. At bottom, intellectual prowess accomplishes little without the disciplines of experience, emotion, and insight. Cultures which widely abandon the guidelines of conscience always find themselves subject to collapse, whether economic or political. Without the ability to feel empathy for the victims of one’s actions, any disaster becomes possible.

2) The Displacement Of Cultural Subsections

A society that maintains healthy appearances by purposely displacing and marginalizing certain belief systems or political stances is by its very nature self-destructive. For progress to be made, inclusion of ideas is paramount. Ideas must be allowed to stand on their own merit and not be victimized by the biases of an elite minority, or in some instances, an ignorant majority. Strong and meaningful ideas must be given space to thrive while bad ideas must be allowed to fall to the wayside. This happens when open discussion is given fair play. Suppression of discussion, whether by force or by stealth, leads to an inability of the people to form a true identity. Forced consensus ends not in stability, but in madness.

3) Distraction Over Substance

Distracted people are uncaring people. A nation distracted by its own immediate desires over the concerns of the future is completely incapable of acting in its own best interest. Distraction comes in many forms, from vapid entertainment, to disinformation, to war and economic uncertainty. While most people are more than able to produce their own distractions, often governments will lend a helping hand in order to dissuade the masses from participation in the decision making processes. This includes the dilution of educational options and/or the co-option of the educational system altogether.

You will find that in nearly every collapse of modern times, the citizenry found themselves surprised and shell shocked despite numerous and easily identifiable warnings. You will also find that the stunned populace was usually obsessed with any existing method to avoid involvement in the workings of the system in which they lived. They were caught off guard because, in the end, they were more comfortable not knowing the details. Comfort at the price of vigilance ends in devastation.

4) When Law Becomes Tyranny

Law, at least as far as the fundamentals are concerned, is designed to protect citizens as well as authorities from undue actions and accusations. At its best, law shields us from our own follies, which may include the allowed ascension of poor leadership. At its worst, law is no longer used as a tool for protecting the public from error and malice, and is instead used as a tool for enslavement.

When a culture elevates and worships law over the contents of their own consciences, the abuse of law for the sake of control is imminent. Law does not trump heart, yet many past societies have been convinced to follow immoral laws all while mistaking their actions for “civic duty”. When law becomes infallible, fallible government becomes god, and no nation will ever be able to sustain such a delusion of grandeur for very long without reaping catastrophe.

5) Force Over Reason

Force is used only in two instances within a domestic political environment; when a controlling entity seeks to acquire or maintain power after fear and disinformation have failed, and when a rebellious public seeks to undo the wrongs done and reason has gone ignored. A nation run by dishonest men is already a supreme candidate for extreme collapse, but when despots turn to violent policies to silence dissent, you can be sure that conflict is soon to follow. The level of this tension will be readily visible in the militant presence of the government in public buildings, on the roads, and even in the neighborhoods of the citizenry. A standing army upon the soil of a country, regardless of supposed rationale, is a recipe for a breakdown that goes far beyond the more manageable effects of financial distress and into the realm of lasting and vicious war.

6) False Paradigms And Mistaken Enemies

A country near bedlam is usually filled with people seeking not just answers, but someone, anyone, to blame. This need for “justice” can be very misguided, and results in the projections of our own terrors onto innocent bystanders. Collapse is very often preceded by a swelling wave of attacks, usually directed at groups contrary to the majority belief. Political parties become factions. Ideals become battle cries. Fervor for retribution takes over. All the while, the true culprits (who are normally not a part of either side) sit back, relax, and turn the public in on itself. A frantic nation is an easily manipulated nation. Divided and fragile, such systems degrade while the source of the problem remains hidden.

7) Desperation And Loss Of Will

A culture on the verge of sliding into full spectrum disintegration is generally not very chipper, however, when this despair results in the handing over of personal liberty for the sake of so called “security”, an avalanche of regret and wild compensation in the form of moral relativism results. No matter what the state of a nation and its people, the will to move forward and to act for the betterment of the future can and does change everything. The blackest days of dread and ill omen are no match for man’s ability to endure when he holds the truth dear. No obstacle is insurmountable. No enemy unbeatable. But, when that will is lost, so too is everything else.

The concentration and frequency of the above elements can easily reveal the point at which a country is in respect to collapse. America now has many of these diseases at one stage or another, and in certain ways, has surpassed historic examples to form a never-before-seen dynamic for global turmoil. Currently, citizens are turning in greater and greater numbers to activism and protest, but the focus has moved away from the elites (central bankers and globalists) who deserve the largest portion of the public’s ire. We have allowed deflections to go unchecked for too long, and the unwillingness of arbitrarily delineated sides (false Left and false Right) to reconcile at least until the larger threat is removed is setting our culture in motion into the depths of a nightmare we are not ready to handle. Such loss has happened before, and, through courage, understanding, and tenacity, it has also been undone before. The choice is ours. It always has been.

Preparing for an economic collapse...foreigners dump U.S. Treasuries 6 weeks in a row...

2011-10-13T17:46:00.000-07:00

This evening Glenn Beck spent his show discussing how to prepare for troubled times ahead. Say what you will about him, but he was right about the 2008 collapse, right about the Arab Spring leading to further trouble in Europe and trouble springing up here in America. He has many poignant and valid thoughts on how to prepare for what may come.

You can sign up for a FREE 2 week trial of his channel on his site (GBTV.COM) and watch for yourself, then decide for yourself what to do next. Below you will find a summary list of his thoughts-but watch the show, think about it and do what is right for you and yours.

A lot of search terms for my site have to do with "prepare for economic collapse." I can't say this is all the answers you need, nor maybe even the right ones for you--you have to watch, read, think, debate, and then decide. I don't advertise anything on my site, but I will say GBTV is something I subscribe to and $10/mo is a hell of deal for it. Don't take my word though, watch it and decide for yourself. You have nothing to lose, and only knowledge to gain. Further down--you can read why preparing soon will be important.

BUY FARM LAND
GROW YOUR OWN FOOD. LIVE NEAR PEOPLE AND BEGIN TO MAKE ALLIANCES OF SKILLS (BARTER) LIVE NEAR FARM LAND

ELECTRONICS FREE
PAPER COPIES OF IMPORTANT DOCUMENTS
KNOW WHERE YOUR DEEDS ARE. TAKE THEM IN EMERGENCY
RUSSIAN GANGS IN TROUBLE

COLLEGE/SCHOOL
APPRENTICESHIPS ARE THE FUTURE.
DISCUSS THE VALUE OF SCHOOL FOR WHAT YOU CAN EARN.
DO NOT LOOK FOR LABELS THEY WILL BECOME MEANINGLESS (YALE)
FIND OTHER FORMS OF SCHOOL. ON LINE.
TEACH YOUNG CHILDREN NOW THAT COLLEGE IS NOT A GIVEN
DEMAND MERIT FROM SCHOOL AND STUDENT OR PULL YOUR TIME/ $
EDUCATE YOURSELF AT ALL TIMES. ALWAYS READ.
HAVE A HARD COPY OF IMPORTANT BOOKS AND DOCUMENTS
LEARN OLD AND OR LOST PRACTICES.
MENDING/CANNING/FARMING
LEARN TO FIX AN ENGINE
RE-LEARN READING A MAP
KNOW THE NEWS. LIFE CAN CHANGE QUICKLY.
BE ABLE TO DEFEND YOUR POSITIONS BY KNOWING THE OTHER SIDE

TRADITIONS
PRESERVE WHAT IS IMPORTANT. SHED ALL OTHERS. CONSERVE AND
PRESERVE. RECLAIM AND RESTORE.

MONEY -
GOLD, FOOD, CIGARETTES, LIQUOR, SUGAR, AMMUNITION, GUNS, SEEDS,
SKILLS (BARTER) KNOWLEDGE
HAVE 30 DAYS CASH ON HAND
BUY A HOUSE
STOP ALL EXCESS SPENDING. BUY QUALITY ONLY. FORGET FASHION ONLY
MEASURE TWICE – CUT ONCE. DO NOT WASTE.
CONSIDER A FUEL EFFICIENT – SUV/TRUCK
CONSIDER SOMETHING PRIOR TO 1979 FIX YOURSELF

LOCATION
LIVE NEAR LIKE MINDED PEOPLE. TEXAS, MOUNTAINS OR WHERE GOD STILL PLAYS A ROLE IN REAL LIFE
IF YOU CANNOT MOVE (NO PLACE WILL BE UNTOUCHED) CREATE NETWORK

BUSINESS/WORK
BE THE BEST YOU CAN BE. BE THE ONE EMPLOYEE NO ONE CAN FIRE
SMALL BIZ – BE THE PRODUCT OR SERVICE NO ONE CAN CANCEL
CONSERVE AND PRESERVE
LEARN FROM THE DEPRESSION -
ADVERTISE WHEN NO ONE ELSE IS: CHEVOLET
STAY IN BUSINESS BUT DOWNSIZE AND PRESERVE (ARCH)
HONESTY, INTEGRITY AND CHARITY.

BE GEORGE BAILEY
SPIT YOURSELF OUT OF THE SYSTEM. TURN UPSIDE DOWN NOW
PUT YOUR MONEY WHERE YOUR HEART IS
DO BUSINESS IN SYMBIOTIC WAYS – WE NEED EACH OTHER
DO NOT TRY TO PUT OTHERS OUT OF BUSINESS, LET THEM DO IT.
GIMBLES AND MACYS
NEVER BE THE SMARTEST MAN IN THE ROOM
TAKE CARE OF YOUR EMPLOYEES THE BEST YOU CAN.
TAKE LESS AND GIVE MORE
READ FRANKLIN AND WASHINGTON

LIFE
DO NOT PLAN YOUR LIFE AND THEN MOVE. PLAN, LISTEN AND OBEY
PRACTICE AT LEAST FRANKLINS AMERICAN RELIGION
SERVE
HONOR ALL OF YOUR OBLIGATIONS
PRESERVE – FOOD, TIME, MONEY, ENERGY
TEACH YOUR CHILDREN THE BASICS. VALUES/PRINCIPLES
DO WITH LESS NOW. LESS OF A SHOCK IF IT COMES LATER
SERVE/SHARE
JOIN A 9.12 GROUP. LINK ON LINE. PHONE AND LOCATIONS
HAVE A MEETING PLACE ESTABLISHED FOR FAMILY
READ THE BIBLE
HAVE A GUN AND KNOW HOW TO SHOOT IT.
RESOLVE THOSE ISSUES THAT ARE HOLDING YOU BACK
STOP ALL BEHAVIOR THAT DOES NOT EXPAND YOU OR OTHERS INTO GOOD
MAKE AMENDS FOR WHAT YOU HAVE DONE
FIND PEACE AND GET TO WORK
TEACH CHILDREN WORK ETHIC
TOLERATE NOTHING THAT YOU FEEL IS WRONG BY REMAINING SILENT
LET YOUR CHILDREN SEE YOU STAND
BE HONORABLE IN ALL OF YOUR DEALINGS
UNDERSTAND THAT ANGER IS A PART OF LIFE BUT NEVER FEED IT
THE FIRST LOOK IS NOT A PROBLEM. IT IS THE SECOND LOOK.
NEVER BE THE BEST MAN/WOMAN IN THE ROOM.
BE HAPPY AND OPTIMISTIC. LIFE WILL GO ON. MAKE PLANS FOR THE
FUTURE. GET MARRIED. HAVE CHILDREN.

SOURCE:
Over the weekend, we observed the perplexing sell off of $56 billion in US Treasurys courtesy of weekly disclosure in the Fed's custodial account (source: H.4.1) and speculated if this may be due to an asset rotation, under duress or otherwise, out of bonds and into stocks, to prevent the collapse of the global ponzi (because when the BRICs tell the IMF to boost its bailout capacity you know it is global). We also proposed a far simpler theory: "the dreaded D-day in which foreign official and private investors finally start offloading their $2.7 trillion in Treasurys with impunity (although not with the element of surprise - China has made it abundantly clear it will sell its Treasury holdings, the only question is when), has finally arrived." In hindsight the Occam's Razor should have been applied. Little did we know 5 short days ago just how violent the reaction by China would be (both post and pre-facto) to the Senate decision to propose a law for all out trade warfare with China. Now we know - in the week ended October 12, a further $17.7 billion was "removed" from the Fed's custodial Treasury account, meaning that someone, somewhere is very displeased with US paper, and, far more importantly, what it represents, and wants to make their displeasure heard loud and clear. Whether it is China - we do not know: we may have a better view in two months when the September/October TIC data hits, but even then it will be full of errors, as Direct Bidder purchases by the UK usually end up being assigned to China at the yearly TIC audit. And the sellers know this all too well. What they also know is that over the next few days (or weeks - ZH tends to be a little "aggressive" in its estimates for popular uptake), as soon as the broader population understands what has transpired, concerns about the reserve status of the greenback will start to resurface, precisely as many have been warning. And what has happened is that in six consecutive weeks, foreigners have sold $74 billion, or more government bonds in a sequential period of time than ever before.

So... perhaps it is time to reevaluate US intentions for a trade war with any of its "evil" mercantilist, UST-recycling partners. Unless, of course, they want $74 billion to become $740 billion, and to force the Fed to have no choice but to intervene, only this time not with a duration sterilized procedure, but one where the Fed has to buy everything that China et al are selling.
On the other hand, judging by the traditional reaction of various precious metals to this kind of fiat suicide, perhaps it is not such a bad idea after all...

Anonymous NYSE attack fails, stock market up, Europe with a plan...so why so serious?

2011-10-10T18:59:00.000-07:00

First-the Anonymous attack on the NYSE fizzled:
The much anticipated (by occupiers) attack on the NYSE from Anonymous was only able to impact traffic for two minutes in today’s trading. Trading was not affected and the “war” seemed to have been only a brief skirmish. David DeGerolamo

Anonymous Briefly Disrupts Traffic to NYSE Site: Report

Online activist organization Anonymous reportedly disrupted traffic to the NYSE’s website briefly on Monday.

The Chicago Tribune said NYSE.com was sluggish and eventually unavailable between 3.35 p.m. and 3:37 p.m. The report also noted confirmation from a NYSE spokesman that trading had not been impacted.

The hacker activist group Anonymous had posted a YouTube video declaring a “war” against the New York Stock Exchange’s Web site on Columbus Day at 3:30 p.m. ET.

Next, the Dow is blowing up! It's rising fast hooray all our problems are solved...well, I can't really get behind that idea....why?
SOURCE:
Hey, have you heard? The stock market is absolutely soaring right now. The Dow was up 330 points on Monday, and overall the Dow has risen by more than 10 percent since October 3rd. So should we all be throwing our money into the stock market in order to take advantage of this tremendous rally? Well, if you actually believe that the sovereign debt crisis has passed and that we are no longer on the verge of a massive worldwide financial crisis then I have a bridge that I would like to sell you.

The stock market may be soaring, but absolutely nothing has been solved. The truth is that this stock market rally is for suckers. The primary reason why stocks rose today was because German Chancellor Angela Merkel and French President Nicolas Sarkozy promised that they would reveal a "comprehensive response" to the European debt crisis by the end of this month. When pressed for specifics, Sarkozy stated that "now is not the moment to go into the details." So do global financial markets really have a legitimate reason to be giddy about the super secret plan cooked up by Angela Merkel and Nicolas

Sarkozy, or are Merkel and Sarkozy just blowing a bunch of smoke?

Merkel and Sarkozy have made bold promises in the past, but nothing ever got fixed.

So why should we believe them this time?

If they have real solutions, why don't they just reveal them now?

Why keep us in suspense?

By making these vague promises, Merkel and Sarkozy certainly did give a boost to global financial markets, but they also seriously raised expectations.

Now many in the financial world are expecting something truly significant from Merkel and Sarkozy. For example, CNN has quoted economist Scott Brown as saying the following about the announcement by Merkel and Sarkozy....

"The Europe debt crisis cloud has been hanging over the market for a year-and-a-half now," said Scott Brown, chief economist at Raymond James. "The risks and worries have been intensifying over the last couple of weeks, but after this weekend, the market is expecting something big and concrete that will put the crisis behind us."

So can Merkel and Sarkozy deliver something big?

Of course not.

Merkel has already gotten all of the bailout money that she is going to get out of the Germans. The political will for more bailouts is totally gone in Germany, and many of Germany's top leaders have expressed this in no uncertain terms.
For example, German Finance Minister Wolfgang Schaeuble is publicly admitting that Germany will not be able to contribute any more money to the European bailout fund.

Also, the leader of Bavaria's Social Christians, Horst Seehofer, said after the recent vote on the Greek bailout package that his party would go "this far, and no further".

Recent opinion polls in Germany make it abundantly clear that the German people are overwhelmingly opposed to more
bailouts. Squeezing more money out of Germany simply is not going to happen, and that means that squeezing more money out of the rest of Europe is simply not going to happen.

In a recent editorial, Ambrose Evans-Pritchard described the current political situation in Europe in this manner....

Repeat after me:
THERE WILL BE NO FISCAL UNION.
THERE WILL BE NO EUROBONDS.
THERE WILL BE NO DEBT POOL.
THERE WILL BE NO EU TREASURY.
THERE WILL BE NO FISCAL TRANSFERS IN PERPETUITY.
THERE WILL BE A STABILITY UNION – OR NO MONETARY UNION.
Get used to it. This is the political reality of Europe, since nothing of importance can be done without Germany. All else is wishful thinking, clutching at straws, and evasion. If this means the euro will shed some members or blow apart – as it almost certainly does – then the rest of the world must prepare for the day.

So exactly what "big" solution do Merkel and Sarkozy have up their sleeves that does not involve more money?
Can they really produce the goods or are they just blowing smoke?

Perhaps global financial markets should be focusing on what we can see rather than on what we cannot see.
For example, the first major bank bailout in Europe has now happened. Dexia is being bailed out, and it is going to cost more than 100 billion dollars.

The funny thing is that Dexia actually passed the banking stress test that was conducted a few months ago.
What does that say about all of the major European banks that did not pass the stress test?

Also, perhaps global financial markets should focus on all of the credit ratings that are being downgraded all over Europe.
Lately, we have seen a cascade of credit rating downgrades.

For example, Moody’s slashed Italy’s credit rating by three levels last Tuesday, and the other day S&P slashed the credit ratings of seven different major Italian banks.

The problems in Europe continue to grow worse, and yet the stock market is soaring.

It doesn't make a lot of sense, does it?

If Greece defaults, it is going to be a major disaster.

If Italy or Spain defaults, it is going to be financial armageddon.

The world truly is on the verge of a massive financial crisis. If you don't want to believe me, perhaps you might believe some of the top financial officials in the world....

*Bank of England Governor Sir Mervyn King: "This is the most serious financial crisis we've seen at least since the 1930s, if not ever"

*U.S. Treasury Secretary Timothy F. Geithner recently stated that if something is not done quickly, Europe faces "cascading
default, bank runs and catastrophic risk."

*IMF advisor Robert Shapiro: "If they can not address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system. We are not just talking about a relatively small Belgian bank, we are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere because the global financial system is so interconnected."

For many more shocking quotes about how bad things have gotten in Europe, just check out this article.
Merkel and Sarkozy are holding really weak cards but they have chosen to raise the stakes anyway.
Their bluff may calm financial markets for a month or two, but in the end they will not be able to stop what is coming.

A great financial collapse is coming to Europe.

Try to get out of the way of the coming avalanche while you still can.

The death of Dexia this weekend. The first domino in European Union financial collapse?

2011-10-08T13:40:00.000-07:00

SOURCE

Monday has all the makings of another epic risk off day. Because while all it takes is a rumor (of a plan for a plan) to start a squeeze, we are about to get some very nasty actual events which will demand immediate and forceful intervention by the powers that be, something which Europe (and the US) has proven is virtually impossible. The events in question are, as Reuters reports, that i) "Dexia's Funeral Will Be Announced On Sunday" and, as Bloomberg reports, that ii) Slovakia’s ruling Freedom and Solidarity party won’t back the overhaul of the European bailout mechanism after Prime Minister Iveta Radicova rejected the party’s conditions for approval, a lawmaker said.

First, on Dexia via Reuters:

France and Belgium are expected to finalise plans this weekend to break up Dexia, which helps finance hundreds of towns in both countries and became the first European bank to fall victim to the euro zone crisis.

Dexia, whose board is likely to meet on Sunday, was forced to seek government help earlier this week after a liquidity crunch hobbled the lender and sent its shares into a tailspin.

The bank's implosion has added to investors' worries about the solidity of European banks and has coincided with increased European Union talk about coordinated action to recapitalise banks across the continent.

The burden of bailing out Dexia also prompted Moody's to warn Belgium late on Friday that its credit rating could fall.

The ratings agency also cited the prospect of higher funding costs and weak economic growth as reasons for putting Belgium's Aa1 government bond ratings on review for possible downgrade.

France and Belgium have guaranteed Dexia's financing, paving the way for a new rescue for the bank, which is struggling to wind down billions of euros in toxic assets accumulated during an overambitious expansion plan.

But there were signs that the details of the rescue were proving troublesome, as a Dexia board meeting originally scheduled for Saturday slipped back to Sunday.

Still, a source close to the talks was confident the bank's future would be determined before the opening of markets on Monday morning.

"The need to rescue Dexia is symbolic of the uncertainty that characterises the banking sector," said Eric Galiegue, president of Valquant, an independent research firm. "Who would have imagined that a bank so linked with European construction would end up being dismantled?"
"Dexia's funeral will be announced on Sunday," the source said.

Summarizing the above: nobody has any clue what the proper response here is nor how the market will react.
And as for the second key event just unveiled...

Slovakia’s ruling Freedom and Solidarity party won’t back the overhaul of the European bailout mechanism after Prime Minister Iveta Radicova rejected the party’s conditions for approval, a lawmaker said.

The party, known as SaS, insists its three coalition partners agree to two conditions before it will back the enhancement of the euro region’s bailout fund, the European Financial Stability Facility, in a parliamentary vote Oct. 11, said Jozef Kollar, head of SaS’s parliamentary caucus. “If the solutions we have put forward aren’t accepted then we will not vote for the EFSF,” Kollar said in a debate on state Slovak Radio today.

Slovakia and Malta are the only countries that haven’t yet ratified the key element in the European Union’s plan to prevent the region’s debt crisis from spreading. The Slovak row risks sinking the EU plan, which needs the unanimous consent of all 17 euro members to come into force.

SaS is calling for the creation of an inter-party committee that would have a right to veto individual EFSF disbursements. It is also demanding that Slovakia doesn’t participate in the European Stability Mechanism, a permanent rescue vehicle set to come into force in 2013. SaS will negotiate “until the last minute” with its coalition partners, according to a statement posted on the party’s web site today.

Smer, the largest opposition party, has said it won’t support the EFSF overhaul unless the government steps down.

For those who are still confused, here is what is going on:

The bailout plan that was proposed in July, and was supposed to be operational by the start of September, has still not been ratified, and now the smallest European country is holding the entire continent, its currency, and frankly the Fed, which will have to step in and bailout Europe, hostage.

In the meantime, the first actual core bank casualty is about to go 6 feet under, and unleash a falling house of cards of unpredictable consequences, which will likely make the "fear and loathing" chart presented previously double in a very short time.

And in this environment, where the decisionmakers in Europe are objectively about 2 years behind the curve, are paralyzed into inactivity and torn asunder by warring political parties, the market actually believes that some actual "solid" policy intervention can about to take place?

Global financial melt down in 2-3 wks? --IMF advisors says its possible

2011-10-06T17:47:00.000-07:00

A week after the BBC exploded Alessio Rastani to the stage, it has just done it all over again. In an interview with IMF advisor Robert Shapiro, the bailout expert has pretty much said what, once again, is on everyone's mind: "If they can not address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system. We are not just talking about a relatively small Belgian bank, we are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere because the global financial system is so interconnected. All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world. This would be a crisis that would be in my view more serrious than the crisis in 2008.... What we don't know the state of credit default swaps held by banks against sovereign debt and against European banks, nor do we know the state of CDS held by British banks, nor are we certain of how certain the exposure of British banks is to the Ireland sovereign debt problems."
But no, Morgan Stanley does, or so they swear an unlimited number of times each day. And they say not to worry about anything because, you see, it is not like they have any upside in telling anyone the truth. Which is why for everyone hung up on the latest rumor of a plan about a plan about a plan spread by a newspaper whose very viability is tied in with that of the banks that pay for its advertising revenue, we have one thing to ask: "show us the actual plan please." Because it is easy to say "recapitalize" this, and "bad bank" that. In practice, it is next to impossible. So yes, ladies and gentlemen, enjoy this brief relief rally driven by the fact that China is offline for the week and that the persistent source of overnight selling on Chinese "hard/crash landing" concerns has been gone simply due to an extended national holiday. Well, that holiday is coming to an end.

Occupy Wall Street goes global? Wall Street to disapear from Web on Monday?

2011-10-05T17:55:00.000-07:00

As I pointed out to you in March this year, Stephen Lerner outlined the plan for Occupy Wallstreet, and now it is happening and spreading...

While New Yorkers were focused on what happened on the Brooklyn Bridge this weekend, people in cities across the U.S. started their own Occupy protests. They're all being organized separately, but umbrella website OccupyTogether.org is tracking all planning meetings and protest launches.
We took a look at protests in some of the biggest cities and put together an overview for you here. Plus, there's a look ahead. The protestors want to go International. Read more: http://www.businessinsider.com/a-look-at-occupy-wall-street-protests-in-major-citites-across-the-country-2011-10?op=1#ixzz1ZxT0ih5u

So if you think this growing unrest and various groups trying to overthrow capitalism and the republic isn't an issue...well maybe the threat of wiping the New York Stock Exchange completely off the internet on Monday is?

Hacktivist group Anonymous, which is currently marching along side the Occupy Wall Street demonstrators, is planning a cyber-attack on the New York Stock Exchange's website.
The hacker group posted a video on YouTube yesterday saying the attack on the NYSE's website will take place on October 10 at 3:30 p.m. EST. [via NetNet]
"The NYSE shall be erased from the Internet," the digital voice says. "Expect a day that shall never ever be forgotten."
The Department of Homeland Security has warned financial firms to remain vigilant against a possible cyber security threat posed by Anonymous, the Post reported.

Things are getting rough and its not going to get better anytime soon, get prepared for the worst and give yourself peace of mind.

IMF may need bailout now?

2011-09-25T17:48:00.000-07:00

Christine Lagarde has signaled that the International Monetary Fund (IMF) may have to tap its members – including Britain – for billions of pounds of extra funding to stem the European debt crisis.

SOURCE

The head of the IMF has warned that its $384bn (£248bn) war chest designed as an emergency bail-out fund is inadequate to deliver the scale of the support required by troubled states.

In a document distributed to the IMF steering committee at the weekend, Ms Lagarde said: "The fund's credibility, and hence effectiveness, rests on its perceived capacity to cope with worst-casescenarios. Our lending capacity of almost $400bn looks comfortable today, but pales in comparison with the potential financing needs of vulnerable countries and crisis bystanders."

The suggestion came after European officials revealed they were working on a radical plan to boost their own bail-out fund, the European Financial Stability Facility (EFSF), from €440bn (£384bn) to around €3 trillion.

The plan to increase the EFSF firepower is the crucial part of a three-pronged strategy being designed by German and French authorities to stop the eurozone's debt crisis spiralling out of control. It also includes a large-scale recapitalisation of European banks and a plan for an "orderly" Greek default.

Although Britain is not involved in the large-scale eurozone bail-out projects, it is liable for 4.5pc of IMF funding.

The plan, which would aim to build a "firebreak" around the indebted eurozone countries, emerged at the IMF annual meeting in Washington where global leaders united to demand urgent action from European politicians. Despite the developments, traders warned that the failure of politicians to agree a solid rescue plan would result in more turbulence on global stock markets.

One trader said: "The expansion to the EFSF would be good, although it's still not the eurobonds that the market has really been wanting to see. And, most significantly, it's still only an idea, not a deal."
In a G20 communique issued on Friday, leaders set a six-week deadline to resolve the crisis – to unveil a solution by the G20 summit in Cannes on November 4.

However, already the plans to recapitalise European banks have been criticised in France – which has the biggest exposure to Greek debt.

The governor of the Bank of France, Christian Noyer, told reporters yesterday he didn't "see any sign" that French banks were in trouble and that he believed there was "no need" for a recapitalisation.
But international pressure on European politicians has intensified.

Timothy Geithner, the US Treasury Secretary who proposed an increase to the EFSF at the Ecofin meeting on September 16, said that the sovereign debt pressures and banking strains in Europe were "the most serious risk now confronting the world economy". Larry Summers, Barack Obama's former chief economic adviser who was attending his 20th IMF meeting, said: "I have not been at a prior meeting at which matters have had more gravity."

Demands for action were also made by emerging market leaders. Brazil's finance minister, Guido Mantega, said European policymakers had a responsibility "to ensure that their actions stop contagion beyond the euro periphery".

The governor of the Chinese central bank, Zhou Xiaochuan, said that "the sovereign debt crisis in the euro area needs to be resolved promptly to stabilise market confidence".

With Greece facing a debt deadline at the beginning of October, the first priority is to release an €8bn tranche of bail-out money. Ms Lagarde said that the priority of international authorities this week must be "implementation, implementation, implementation" of the bail-out agreement of July 21.

Collapse of the Euro? Six weeks to save it...

2011-09-24T07:42:00.000-07:00

SOURCE
World leaders were warned last night that they have just six weeks to save the euro from collapse.

On another day of gathering economic gloom, George Osborne savaged eurozone leaders for failing to get a grip on their towering debts.

The Chancellor set a deadline of six weeks – when leaders of the G20 group of leading countries will meet for crunch talks in France – for action.

Outrage: Protests spark in Thessaloniki over cuts imposed on Greece

He said: 'Patience is running out in the international community. There is a sense from across the leading lights of the eurozone that time is running out for them.

'The eurozone has six weeks to resolve this political crisis.'
Mr Osborne also signalled dramatic plans to prop up Britain's faltering economy, opening the door for a rescue plan that would see the Bank of England lend directly to struggling small businesses.

In other developments:

IMF chief Christine Lagarde said the challenge facing the world 'could not be more urgent';
World markets remained dangerously volatile, with Britain's leading firms seeing £78billion wiped off their value this week;
The G20 insisted it would take necessary steps to try to stop the eurozone crisis spreading;
Debt-laden Greece admitted for the first time that an 'orderly default' was an option;
Economists at the Royal Bank of Scotland predicted that Europe is falling back into recession.

There is a growing expectation in Whitehall that the Bank of England will authorise another emergency injection of cash into the economy with a second round of 'quantitative easing' – essentially, printing money.

As much as £300billion is expected to be flooded into the economy despite the risk that it will push inflation still higher, increasing the cost of living.

The Bank has already poured £200billion into the economy to try to bolster growth, but there have been renewed calls for another dose of the medicine.

Mr Osborne, in Washington, signalled that he is open to the idea of the Bank ring-fencing some of the cash for direct loans to small or medium-sized firms that are in urgent need of help to expand or simply keep afloat.

The move would be a victory for the Daily Mail's Make the Banks Lend Campaign, which has highlighted the banks' refusal to provide credit to small businesses and demanded action to help the lifeblood of the British economy.

The Chancellor said it was 'bad politics' that was leading to 'bad economics' in the EU, insisting the continent must implement a package of measures agreed in July to provide bailouts for foundering countries in the single currency.

The Chancellor wants a £350billion European Financial Stability Facility, which provides bailouts for countries at risk of defaulting on their debts and sending shockwaves through the world's banking system, to be beefed up. 'I am not sure it is adequate,' he said.

Britain is also pushing the euro countries to move quickly to ensure banks in the danger zone have more capital, to ensure they can withstand market pressures.

Mr Osborne refused to be drawn on whether Greece would be forced into a debt default and a potential exit from the single currency, but revealed that Britain has contingency plans to cope with such an outcome.

'I have made it a priority for the Financial Services Authority and the Bank of England to make sure that the UK banking system is adequately capitalised and has sufficient liquidity to deal with all eventualities,' he said.
He admitted that the growing international economic crisis would hit Britain, but flatly rejected calls to soften his deficit reduction plan.

'The UK is taking appropriate action,' he said. 'It is very clear what has got to happen. We are sticking to the plan. We have got ahead of the curve and have credibility.'

Michael Saunders, an economist at CitiBank, said he had halved growth forecasts for Britain to 1 per cent this year and just 0.7 per cent next year.
He said he expected unemployment to rise from 7.9 per cent to 9 per cent, which would bring the total close to the 3million who were out of work in the 1980s.

Mme Lagarde warned again of 'downside risks on the horizon' for the global economy and said developing economies must play a part in propping it up.
The IMF boss said: 'There is growth. The bad news is that it is slow growth. There are downside risks on the horizon, and they are piling up. Negative feedback loop between weak growth, weak banks, and what is very much perceived as weak political commitment. This has led to a crisis of confidence.'

Echoing Mr Osborne's refrain about the need for deficit reduction in Britain, she added: 'We are all in this together. There are dark clouds over Europe and huge uncertainty in the U.S., and with that we could see collapse in global demand.'

The FTSE 100 Index lost 5.6 per cent or £78billion from its value this week, the second worst weekly fall this year, despite a last-minute push which saw it close 0.5 per cent higher on the day yesterday.

America has lost patience with Europe

BY ALEX BRUMMER
The veteran U.S. monetary official did not mince his words in a private conversation over dinner. 'America is very, very angry over what has been going on in the eurozone.'
As the markets went into freefall over the last few days, the deterioration in relations between the U.S. and the countries of the single currency has become frightening.
The Americans believe that if the world were to tumble back into recession or a prolonged depression, as looks increasingly likely, it would be the euro area to blame.

All the hard work done in the U.S., Britain and other countries in the wake of the Lehman Brothers collapse three years ago – including the regime of record low interest rates and pumping hundreds of billions of taxpayer pounds into the banks and the economy – will have been wasted.
George Osborne has made clear that he believes the euro is in the last-chance saloon. The crisis which began in Greece in early 2010 has been allowed to fester for too long.
What is plain is that at an overnight emergency session of the G20 advanced and leading emerging markets economies here in Washington, the euroland leaders were read the riot act.

Up and down: The Dow Jones has fluctuated by more than 6,000 points since President Obama took office in January 2009, hitting a low of 6,547 in the spring season of his first year and a high of 12,811 earlier in 2011

They were made to recognise that the falls in share markets around the world, which have impoverished tens of millions of savers and pensioners, are fed by fear for future global prosperity and are not the result of some Anglo-Saxon plot to bring down the single currency.
The reality is that months of appalling indecision, driven by some of the mini-countries within the monetary union, had in fact underlined the need for Germany and France to seize the political opportunity to bring the crisis to an end.
The final deadline set by the G20 for sorting out the mess is the Cannes G20 summit on the first weekend of November. That, if all goes well, should see the formal launch of the European Financial Stability Facility (of which Britain is not a part), a bailout fund that is capable of rescuing Greece.

Up and down: The Dow Jones industrial average finished up 38 points, or 0.4 percent, at 10,771 today

Enlarge

Down: This graph shows how the Dow Jones industrial average has fluctuated over the past week

That may all seem hunky-dory. But in the world of fast-moving, testosterone- and panic-fuelled financial markets, it looks a lifetime away. If shares were to continue to fall at the mad pace of the last few days – wiping out great chunks of the capital of Britain's major companies – then all bets would be off.
The big lesson of the Great Depression of the 1930s is that governments and central banks around the world were too slow to act.
Euro leaders claim they are victims of Parliamentary timetables which have meant long delays in getting the bail-out fund up and running.
But investment managers, hedge funds, the big global banks and other market participants have lost faith in the eurozone's will to act. The eurozone needs to move to a war footing, by pumping new capital into its banks, and setting up a rescue fund with the capacity to save Italy or Spain if it became necessary.
Britain cannot divorce itself from events given that up to 80 per cent of our trade is with euro-area nations.
Without a eurowide rescue, the prospects of heading off a prolonged slump – which will devastate every British household and business – will be remote.

Food for Thought: thoughts of food

2011-09-23T19:30:00.000-07:00

Clearly with the world economic troubles and the constant bad weather, things are rough and getting rougher. I have made mention previously about possible warning signs of trouble ahead and asked you to consider your own food supply. Anyone who has been through a hurricane or earthquake can tell you food is GONE before the storm hits and most people panic buy and hope right before. Even though they have had (usually-but not always) ample warning. Well it seems like we are being given ample warnings-but I don't know if you are hearing them. So whomever you are reading this, I hope you are seeing the storm clouds gathering. i hope you are doing what you can to be self reliant and to be a shelter for others should the times become difficult. To that end here is another possible warning for you to consider:

ORIGINAL SOURCE OF THIS ARTICLE
Is the U.S. government stockpiling huge amounts of food and supplies in anticipation that something bad is about to happen? Is something about to cause a major economic crisis that will require large quantities of emergency food? For a while, I have been hearing things about the government storing food through the grapevine and I have not been sure what to think about those rumors. Well, today I received a phone call that blew me away. I debated for quite a while before I decided whether or not to share this information with you all. Normally I do not like to talk about anything unless I am able to prove it by pointing to an article in the mainstream media. But the source of the information that I am about to share with you is rock solid. I cannot reveal his name, so you will just have to trust me on that. Hopefully the following information will be one more "dot" as we all try to connect the dots about what is really going on out there.
This morning I received a call from a very prominent person in the storable food industry. He has asked me not to reveal his name. I have been dealing with him for an extended period of time and I consider him to be a rock-solid source. When I talked to him today, he had just received a huge order for storable food from a U.S. government source. He told me that the dollar amount of the order was in the "five figures".

When he asked about why so much food was being ordered, the government source told him essentially that "you know what is coming". When pushed further, the government official did not elaborate.
It was unclear whether this was part of a larger food stockpiling program by the government. Perhaps this order was just part of the normal preparations that government agencies make for potential emergencies.
Nobody could blame the government for storing up some emergency food. That is something that we all should be doing.
The truth is that the government is taking emergency preparedness very seriously these days. For example, you can see video of a high-level NASA official urging NASA employees to develop preparedness plans for their own families right here.
But what if this is a sign of something bigger?

Remember, this is not some rumor I just pulled off the Internet. This is not something that someone got from "an aunt" somewhere.

I got this information over the telephone from the person who took the order.

I promised that I would not reveal any more specific details, so I won't.

But this does seem to fit with a pattern that we are beginning to see emerge.
Earlier this year, FEMA issued an RFI (Request For Information) that inquired about the availability of 140 million meals of emergency food. Apparently the food was meant to be stored up in case there was a "catastrophic disaster event" along the New Madrid Fault.
You can view this FEMA RFI right here. The following is an excerpt....

The Federal Emergency Management Agency (FEMA) procures and stores pre-packaged commercial meals to support readiness capability for immediate distribution to disaster survivors routinely. The purpose of this Request for Information is to identify sources of supply for meals in support of disaster relief efforts based on a catastrophic disaster event within the New Madrid Fault System for a survivor population of 7M to be utilized for the sustainment of life during a 10-day period of operations. FEMA is considering the following specifications (14M meals per day):
- Serving Size - 12 ounce (entree not to exceed 480 calorie count);
- Maximum calories - 1200 and/or 1165 per meal;
- Protein parameters - 29g-37g kit;
- Trans Fat - 0;
- Saturated Fat - 13 grams (9 calories per gram);
- Total Fat - 47 grams (less than 10% calories);
- Maximum sodium - 800-930 mg;
Requested Menus to include snacks (i.e. fruit mix, candy, chocolate/peanut butter squeezers, drink mix, condiments, and utensils). All meals/kits must have 36 months of remaining shelf life upon delivery. Packaging should be environmentally friendly.

Mysteriously, seven days later this RFI was cancelled.
At that same time, FEMA also issued an RFI that sought to identify a supplier for 140 million blankets. You can view that RFI right here. The following is an excerpt....

The Federal Emergency Management Agency (FEMA) procures and stores blankets to support readiness capability for immediate distribution to disaster survivors routinely. The purpose of this Request for Information is to identify sources of supply for blankets in support of disaster relief efforts based on a catastrophic disaster event within the New Madrid Fault System for a survivor population of 7M to be utilized for the sustainment of life during a 10-day period of operations. FEMA is considering the following specifications (14M blankets per day):
- 100% cotton;
- White;
- 66" x 90"

Also, there have been some much publicized shortages of storable feed recently. There has been much speculation about whether or not the government is part of the reason for these shortages.
There are some products that simply were not available for an extended period of time. For example, the following was posted on the Mountain House home page....

As you know we have removed #10 cans from our website temporarily. The reason for this is sales of #10 cans have continued to increase. OFD is allocating as much production capacity as possible to this market segment, but we must maintain capacity for our other market segments as well.

The shortages around the country got so bad at one point earlier this year that a special alert was posted on Raiders News....

Look around you. Read the headlines. See the largest factories of food, potassium iodide, and other emergency product manufacturers literally closing their online stores and putting up signs like those on Mountain House's Official Website and Thyrosafe's Factory Webpage that explain, due to overwhelming demand, they are shutting down sales for the time being and hope to reopen someday.

Unfortunately, shortages have not been limited to storable food. Most Americans don't realize this, but there is a significant shortage of certain pharmaceutical drugs in many areas of the country right now. Just check out the video news report posted below....
In addition, it is not just in the United States where food is being aggressively stored up. For example, a recent article in The Telegraph noted that governments all over the globe are now stockpiling food....

Authoritarian governments across the world are aggressively stockpiling food as a buffer against soaring food costs which they fear may stoke popular discontent.

Also, some governments are now gobbling up as much farmland as they can.
According to the New York Times, China has been buying up "vast tracts of Latin America’s agricultural heartland" and is seeking to acquire quality farmland all over the globe.
So what does all of this mean?
It could mean something.
It could mean nothing.

But as I have written about so much recently, we really do seem to be on the verge of a major economic crisis.
The signs that the financial world is melting down are all around us. I won't take the time to repeat what I have covered in the last few days here. If you missed any of it, just go back and read these articles over....
*Is Financial Instability The New Normal?
*Depressed As A Nation? 80 Percent Of Americans Believe That We Are In A Recession Right Now
*Nervous Breakdown? 21 Signs That Something Big Is About To Happen In The Financial World

One thing that I haven't covered yet is a very curious move by Lloyd's of London. It turns out the Lloyd's of London has started pulling money out of banks in Europe’s peripheral economies according to Bloomberg....

Lloyd’s of London, concerned European governments may be unable to support lenders in a worsening debt crisis, has pulled deposits in some peripheral economies as the European Central Bank provided dollars to one euro-area institution.

At this point, world financial markets have officially entered "bear" territory. In fact, global stocks are down approximately 20 percent since May. Many believe that what we have seen is just the beginning of another major financial crisis.
For example, in a recent editorial for The Ticker, Karl Denninger (who saw the 2008 crash coming) warned that the house of cards is starting to fall once again....

Well, America (and the world), you’ve been scammed by the financial institutions and governments for the last 30 years. 2008 was the first spasm of recognition but was short-circuited by…. you guessed it…. even more scams. Rather than demand truth and an end to the games the American consumer lapped up the frauds and schemes of the politicians on both sides of the aisle who conspired with the financiers to rip you off once again.

Later on in the editorial, Denninger stated that he hopes that all of us have "taken the last couple of years to become prepared"....

Now recognition of that fact is dawning on people in a convulsive fashion, and markets of all sorts are reacting as one would expect when their entire worldview is exposed as having been a gigantic and intentional pyramid scheme constructed of debt layered upon debt thatcannot be paid down. The wrong thing was done in 2008 and there is zero evidence that our government has changed one iota in their singular focus on misdirection and lies in this regard.
Welcome to awareness; I hope you’ve taken the last couple of years to become prepared.

Well, if the anecdotal evidence presented above is an indication of a larger trend, it appears that the government is getting prepared.And if the government is stockpiling food, who can blame them?

It should be obvious to anyone that the world has become an incredibly unstable place.
Hopefully we are not about to enter another major economic crisis, but it never hurts to be prepared.
If anyone out there has any additional information that is relevant to this report, please let me know.
If the government really has started to aggressively stockpile food, that would be an important thing to know.
If it is happening, the mainstream media surely will not tell us about it. So we will have to rely on one another for information.

When the EU collapses...what comes after Europe?

2011-09-20T19:52:00.000-07:00

I am not sure, but a new commentary from the Wall Street Journal may be a preview:

When the history of the rise and fall of postwar Western Europe is someday written, it will come in three volumes. Title them "Hard Facts," "Convenient Fictions" and—the volume still being written—"Fraud."

The hardest fact on which postwar Europe was founded was military necessity, crisply summed up by Lord Ismay's famous line that NATO's mission was "to keep the Russians out, the Americans in, and the Germans down." The next hard fact was hard money, the gift of Ludwig Erhard, author of the economic reforms that created the Deutsche mark, abolished price controls, and put inflation in check for generations. The third hard fact was the creation of Jean Monnet's common market that gave Europe a shared economic—not political—identity.

The result was the Wirtschaftswunder in Germany, Les Trente Glorieuses in France and il miracolo economico in Italy. It could have lasted into the present day. It didn't.

In 1965, government spending as a percentage of GDP averaged 28% in Western Europe. Today it hovers just under 50%. In 1965, the fertility rate in Germany was a healthy 2.5 children per mother. Today it is a catastrophic 1.35. During the postwar years, annual GDP growth in Europe averaged 5.5%. After 1973, it rarely exceeded 2.3%. In 1973, Europeans worked 102 hours for every 100 worked by an American. By 2004 they worked just 82 hours for every 100 American ones.

It was during this general slowdown that Europe entered the convenient fiction phase.

There was, for starters, the convenient fiction that if you just added up the GDP of the European Union's expanding list of member states, you had an economy whose size exceeded that of the United States. Didn't this make "Europe" an economic superpower? There was the convenient fiction that Europe didn't need robust military capabilities when it could exert global influence through diplomacy and soft power. There was the convenient fiction that Europeans shared identical values and could thus be subject to uniform regulations governing crime and punishment. There was the convenient fiction that Continentals weren't lagging in productivity but were simply making an enlightened choice of leisure over labor. And there was, finally, the whopping fiction that Europe had its own "model," distinct and superior to the American one, that immunized it from broader international currents: globalization, Islamism, demography. Europeans love their holidays and thought they were entitled to a long holiday from history as well.

All this did wonders, for a while, to mask European failures and puff up European pride. But there is always a danger in substituting grandiosity for achievement, mistaking pronouncements for facts, or, more generally, believing in your own nonsense.

Here is where Europe slipped from convenient fiction to outright fraud.

There was the fraud of Greece's entry into the euro, a double-edged affair since Athens lied about its budgetary figures and Brussels chose to accept the lie. There was the fraud of the so-called Maastricht criteria—the fiscal rules that were supposed to govern the euro only to be quickly flouted by France and Germany and then junked altogether in the current crisis. There was the fraud of the European Constitution, overwhelmingly rejected wherever a vote on it was permitted, only to be revised and imposed by parliamentary fiat.

What is now happening in Europe isn't so much a crisis as it is an exposure: a Madoff-type event rather than a Lehman one. The shock is that it's a shock. Greece was never going to be bailed out and will, sooner or later, default. The banks holding Greek debt will, sooner or later, be recapitalized. The recapitalization will be borne by German taxpayers, and it will bring them—sooner rather than later—to the outer limit of their forbearance. The Chinese will not ride to the rescue: They know not to throw good money after bad.

And then Italy will go Greek. Europe's crisis will lap on U.S. shores, and America's economic woes will lap on Europe's—a two-way tsunami.

America will survive this because America is a state. But as Bismarck once remarked, "Whoever speaks of Europe is wrong. Europe is a geographical expression." The "fiscal union" that's being mooted will never come to pass: German voters won't stand for it, and neither will any other country that wants to retain fiscal independence—which is to say, the core attribute of democratic sovereignty.

What comes next is the explosion of the European project. Given what European leaders have made of that project over the past 30-odd years, it's not an altogether bad thing. But it will come at a massive cost. The riots of Athens will become those of Milan, Madrid and Marseilles. Parties of the fringe will gain greater sway. Border checkpoints will return. Currencies will be resurrected, then devalued. Countries will choose decay over reform. It's a long, likely parade of horribles.

Where is the Europe of Ismay, Erhard and Monnet? It's there in memory, if anyone cares to recover it. Give it another 50 years, and maybe someone will.

Economic Endgame? China to liquidate U.S. Treasuries

2011-09-18T13:16:00.000-07:00

Boys and Girls, the global economic circus is packing up tents and getting ready to boogie out of town. Ever read or see the movie "Something Wicked this way comes" Well I have that feeling here in general. Things are reaching economic and political crisis points in too many countries. Combine this with the constant weather related troubles and you have a veritable dog pile of troubles. Of note:

1. The Greek PM turned his plane around during his flight-cancelling his meeting here with the IMF and U.N.
2. The vote on Palestinian UN membership precedes its attempts at State recognition in the UN is this week
3. China has warned the US not to veto Palestinian recognition.

Well into those top level concerns comes the following

The debt markets have been warned.

A key rate setter-for China's central bank let slip – or was it a slip? – that Beijing aims to run down its portfolio of US debt as soon as safely possible.

"The incremental parts of our of our foreign reserve holdings should be invested in physical assets," said Li Daokui at the World Economic Forum in the very rainy city of Dalian – former Port Arthur from Russian colonial days.

"We would like to buy stakes in Boeing, Intel, and Apple, and maybe we should invest in these types of companies in a proactive way."

"Once the US Treasury market stabilizes we can liquidate more of our holdings of Treasuries," he said.
To my knowledge, this is the first time that a top adviser to China's central bank has uttered the word "liquidate". Until now the policy has been to diversify slowly by investing the fresh $200bn accumulated each quarter into other currencies and assets – chiefly AAA euro debt from Germany, France and the hard core.

We don't know how much US debt is held by SAFE (State Administration of Foreign Exchange), the bank's FX arm. The figure is thought to be over $2.2 trillion.

The Chinese are clearly vexed with Washington, viewing the Fed's QE as a stealth default on US debt. Mr Li came close to calling America a basket case, saying the picture is far worse than when Ronald Reagan and Margaret Thatcher took over in the early 1980s.

Mr Li, one of three outside academics on China's MPC, described the debt deals on Capitol Hill as "just trying to by time", saying it will not be enough to stop America's "debt dynamic" turning dangerous.

Fair enough, but let us be clear: the reason China has accumulated the equivalent of 6pc of global GDP in reserves (like the US in the 1920s) is because it has held down its currency to gain market share. As Michael Pettis from Beijing University points out tirelessly, the mercantilist policy hollows out US industries and forces America to choose between debt bubbles or unemployment – or, of course, protectionism, though we are not there yet.

Until it abandons that core policy, it has to keep buying foreign assets and lots of dollars. The euro can absorb only so much – 800bn euros so far – before Europeans realize (the French already realize) that Chinese bond purchases are double edged, and the yen the Swissie can't absorb anything at all. (The governments are intervening to stop it). Besides, China has the same misgivings about euro debt as it does about dollar debt. Perhaps more so after Euroland's long-running soap opera.

So what Li Daokui said is not bad for the dollar as such. He said there is "$10 trillion" waiting to be invested in the US, if America will open its doors.

It is bad for bonds – or will be. The money will go into strategic land purchases all over the world, until the backlash erupts in earnest. It will go into equities, until Capitol Hill has a heart attack. It will go anywhere but debt. Yet another reason to be careful of 10-year Treasuries and Bunds below 2pc yields. There is a big seller out there, just itching to let go.

Greece collapsing? Financial Collapse of Europe next?

2011-09-12T18:05:00.000-07:00

Are we on the verge of a massive financial collapse in Europe?

Rumors of an imminent default by Greece are flying around all over the place and Greek government officials are openly admitting that they are running out of money. Without more bailout funds it is absolutely certain that Greece will soon default on their debts. But German officials are threatening to hold up more bailout payments until the Greeks "do what they agreed to do". The attitude in Germany is that the Greeks must now pay the price for going into so much debt. Officials in the Greek government are becoming frustrated because the more austerity measures they implement, the more their economy shrinks. As the economy shrinks, so do tax payments and the budget deficit gets even larger. Meanwhile, hordes of very angry Greek citizens are violently protesting in the streets. If Germany allows Greece to default, that is going to start financial dominoes tumbling around the globe and it is going to be a signal to the financial markets that there is a very real possibility that Portugal, Italy and Spain will be allowed to default as well. Needless to say, all hell would break loose at that point.

So why is Greece so important?

Well, there are two reasons why Greece is so important.

Number one, major banks all over Europe are heavily invested in Greek debt. Since many of those banks are also very highly leveraged, if they are forced to take huge losses on Greek debt it could wipe many of them out.
Secondly, if Greece defaults, it tells the markets that Portugal, Italy and Spain would likely not be rescued either. It would suddenly become much, much more expensive for those countries to borrow money, which would make their already huge debt problems far worse.

If Italy or Spain were to go down, it would wipe out major banks all over the globe.

Recently, Paul Krugman of the New York Times summarized the scale of the problem the world financial system is now facing....

Financial turmoil in Europe is no longer a problem of small, peripheral economies like Greece. What’s under way right now is a full-scale market run on the much larger economies of Spain and Italy. At this point countries in crisis account for about a third of the euro area’s G.D.P., so the common European currency itself is under existential threat.

Most Americans don't spend a lot of time thinking about the financial condition of Europe.

But they should.

Right now, the U.S. economy is really struggling to stay out of another recession. If Europe has a financial meltdown, there is no way that the United States is going to be able to avoid another huge economic downturn.
If you think that things are bad now, just wait. After the next major financial crisis what we are going through right now is going to look like a Sunday picnic.

The following are 20 signs of imminent financial collapse in Europe....

#1 The yield on 2 year Greek bonds is now over 60 percent. The yield on 1 year Greek bonds is now over 110 percent. Basically, world financial markets now fully expect that Greece will default.

#2 European bank stocks are getting absolutely killed once again today. We have seen this happen time after time in the last few weeks. What we are now witnessing is a clear trend. Just like back in 2008, major banking stocks are leading the way down the financial toilet.

#3 The German government is now making preparations to bail out major German banks when Greece defaults. Reportedly, the German government is telling banks and financial institutions to be prepared for a 50 percent "haircut" on Greek debt obligations.

#4 With thousands upon thousands of angry citizens protesting in the streets, the Greek government seems hesitant to fully implement the austerity measures that are being required of them. But if Greece does not do what they are being told to do, Germany may withhold further aid. German Finance Minister Wolfgang Schaeuble says that Greece is now "on a knife’s edge".

#5 Germany is increasingly taking a hard line with Greece, and the Greeks are feeling very pushed around by the Germans at this point. Ambrose Evans-Pritchard made this point very eloquently in a recent article for the Telegraph....

Germany’s EU commissioner Günther Oettinger said Europe should send blue helmets to take control of Greek tax collection and liquidate state assets. They had better be well armed. The headlines in the Greek press have been "Unconditional Capitulation", and "Terrorization of Greeks", and even “Fourth Reich”.

#6 Everyone knows that Greece simply cannot last much longer without continued bailouts. John Mauldin explained why this is so in a recent article....

It is elementary school arithmetic. The Greek debt-to-GDP is currently at 140%. It will be close to 180% by year’s end (assuming someone gives them the money). The deficit is north of 15%. They simply cannot afford to make the interest payments. True market (not Eurozone-subsidized) interest rates on Greek short-term debt are close to 100%, as I read the press. Their long-term debt simply cannot be refinanced without Eurozone bailouts.

#7 The austerity measures that have already been implemented are causing the Greek economy to shrink rapidly. Greek Finance Minister Evangelos Venizelos has announced that the Greek government is now projecting that the economy will shrink by 5.3% in 2011.

#8 Greek Deputy Finance Minister Filippos Sachinidis says that Greece only has enough cash to continue operating until next month.

#9 Major banks in the U.S., in Japan and in Europe have a tremendous amount of exposure to Greek debt. If they are forced to take major losses on Greek debt, quite a few major banks that are very highly leveraged could suddenly be in danger of being wiped out.

#10 If Greece goes down, Portugal could very well be next. Ambrose Evans-Pritchard of the Telegraph explains it this way....

Yet to push Greece over the edge risks instant contagion to Portugal, which has higher levels of total debt, and an equally bad current account deficit near 9pc of GDP, and is just as unable to comply with Germany's austerity dictates in the long run. From there the chain-reaction into EMU's soft-core would be fast and furious.

#11 The yield on 2 year Portuguese bonds is now over 15 percent. A year ago the yield on those bonds was about 4 percent.

#12 Portugal, Ireland and Italy now also have debt to GDP ratios that are well above 100%.

#13 Greece, Portugal, Ireland, Italy and Spain owe the rest of the world about 3 trillion euros combined.

#14 Major banks in the "healthy" areas of Europe could soon see their credit ratings downgraded. For example, there are persistent rumors that Moody's is about to downgrade the credit ratings of several major French banks.

#15 Most major European banks are leveraged to the hilt and are massively exposed to sovereign debt. Before it fell in 2008, Lehman Brothers was leveraged 31 to 1. Today, major German banks are leveraged 32 to 1, and those banks are currently holding a massive amount of European sovereign debt.

#16 The ECB is not going to be able to buy up debt from troubled eurozone members indefinitely. The European Central Bank is already holding somewhere in the neighborhood of 444 billion euros of debt from the governments of Greece, Italy, Portugal, Ireland and Spain. On Friday, Jurgen Stark of Germany resigned from the European Central Bank in protest over these reckless bond purchases.

#17 According to London-based think tank Open Europe, the European Central Bank is now massively overleveraged....

"Should the ECB see its assets fall by just 4.23pc in value . . . its entire capital base would be wiped out."

#18 The recent decision issued by the German Constitutional Court seems to have ruled out the establishment of any "permanent" bailout mechanism for the eurozone. Just consider the following language from the decision....

"No permanent treaty mechanisms shall be established that leads to liability for the decisions of other states, especially if they entail incalculable consequences"

#19 Economist Nouriel Roubini is warning that without "massive stimulus" by the governments of the western world we are going to see a major financial collapse and we will find ourselves plunging into a depression....

“In the short term, we need to do massive stimulus; otherwise, there's going to be another Great Depression”

#20 German Economy Minister Philipp Roesler is warning that "an orderly default" for Greece is not "off the table"....

''To stabilize the euro, we must not take anything off the table in the short run. That includes, as a worst-case scenario, an orderly default for Greece if the necessary instruments for it are available.''

Right now, Greece is caught in a death spiral. The more austerity measures they implement, the more their economy slows down. The more their economy slows down, the more their tax revenues go down. The more their tax revenues go down, the worse their debt problems become.

Greece could end up leaving the euro, but that would make their economic problems far, far worse and it would be very damaging to the rest of the eurozone as well.

Quite a few politicians in Europe are touting a "United States of Europe" as the ultimate solution to these problems, but right now the citizens of the eurozone are overwhelming against deeper economic integration.
Plus, giving the EU even more power would mean an even greater loss of national sovereignty for the people of Europe.

That would not be a good thing.

So what we are stuck with right now is the status quo. But the current state of affairs cannot last much longer. Germany is getting sick and tired of giving out bailouts and nations such as Greece are getting sick and tired of the austerity measures that are being forced upon them.

At some point, something is going to snap. When that happens, world financial markets are going to respond with a mixture of panic and fear. Credit markets will freeze up because nobody will be able to tell who is stable and who is about to collapse. Dominoes will start to fall and quite a few major financial institutions will be wiped out. Governments around the world will have to figure out who they want to bail out and who they don't want to bail out.

It will be a giant mess.

For decades, the governments of the western world have been warned that they were getting into way too much debt.
For decades, the major banks and the big financial institutions were warned that they were becoming way too leveraged and were taking far too many risks.

Well, nobody listened.

So now we get to watch a global financial nightmare play out in slow motion.
Grab some popcorn and get ready. It is going to be quite a show.

SOURCE

Greece Default? Europe and the IMF planning for it.

2011-09-11T06:17:00.000-07:00

These are the headlines at Spiegel Online, which should hit the markets like a ton of bricks offers on Monday. Looks like Spiegel posted the teaser to the full story to be released on Monday. Not a great way to restore market confidence. Here’s how the post ends: Read the full story on Monday on SPIEGEL ONLINE International.
And here’s how it begins,

With doubts growing about Greece’s ability to implement important savings measures and reforms, there are concerns that insolvency may be inevitable. In Germany, officials in Wolfgang Schäuble’s Finance Ministry are exploring what Athens’ financial collapse would mean for the euro zone.

German Finance Minister Wolfgang Schäuble, who is reportedly doubtful that the country can be saved from bankruptcy, is preparing for the possibility of Greek insolvency. Officials in his ministry are currently reviewing scenarios for handling such a situation, exploring what it might mean for the rest of the euro zone. Under the first scenario for a Greek bankruptcy, the country would remain in the euro zone. Under the other, Athens would abandon the common currency and reintroduce the drachma.

And this,

One of these key instruments would be credit lines provided to countries like Spain or Italy if investors stop lending them money after a Greek bankruptcy. If banks were forced to write off the billions in Greek government bonds on their books, they could become reliant on billions in rescue fund aid in numerous euro-zone countries. Both developments are to be expected in a Greek insolvency, regardless of whether the country exits the euro or not.

Volker Bouffier, the governor of the state of Hesse, which is home to Germany’s financial capital Frankfurt, is a member of Chancellor Angela Merkel’s conservative Christian Democratic Union (CDU) party, as is Schäuble. Bouffier is now urging that the possibility for countries to leave the euro zone be created quickly. Current European Union treaties provide no provisions for a country to abandon the currency.

Call us paranoid but we were perplexed reading this in the G7 comminque,

Central Banks stand ready to provide liquidity to banks as required. We will take all necessary actions to ensure the resilience of banking systems and financial markets.

Do or are the banks, and which ones, for that matter, going to need to CenBank liquidity? Certainly not U.S. banks who are sitting on a mountain of excess reserves. Is the G7 anticipating or seeing a liquidity crunch in Europe? Maybe that is why gold is flopping around like a fish out of water.

Is Greece so far out of compliance with its IMF program that there’s no hope? Or is this just hardball negotiating tactics to give them one last chance before Germany pulls the plug? We have no freaking idea and just trying to make decisions with imperfect information. We’re getting whipped around by the tape bombs coming out of Euroland just as much as anyone else.

Nevertheless, Zero Hedge cites this Dow Jones story, IMF Likely To Re-Activate $580B Resource Pool Amid Europe Crisis-Sources, which states,

The International Monetary Fund will likely re-activate a $580 billion resource pool in coming weeks to ensure it has funds to help cover Europe’s worsening sovereign-debt crisis, according to several people close to the matter.

The IMF activated the so-called New Arrangements to Borrow in April of this year for a six-month period. The IMF’s board, which met informally on the issue late Friday afternoon, would have to approve re-activation of the resource pool if the fund wants to tap it beyond September.

“A large majority of the board members are in favor of re-activating the NAB,” as a precautionary measure, one of the people said. The board is scheduled to formally approve activation next Friday, the person said.

David Lipton, first deputy managing director at the IMF, said recently in a private meeting that keeping the NAB available may be necessary in coming months given Europe’s debt meltdown, people familiar with the matter said. The crisis is entering a dangerous new phase as the risk of Greece defaulting rises and Italy and Spain’s sovereign debt has come under attack.

And we note this from Reuters quoting French FinMin Alain Juppe,

Greece has made some mistakes. They have to correct these mistakes. They also have to honor the commitments that they have made.

Enough to make you think something big is about to break as it appears the powers that be are assembling a huge armada of liquidity.
SOURCE

Greece default this weekend? More economic trouble on the horizon...

2011-09-09T17:22:00.000-07:00

Tons of people are chattering about the possibility of a Greek default today, with Germany ready to bail out its banks if that happens. There are two reasons that people are speculating on a Greek default this weekend.
First, private sector participation in the bailout—in which bondholders would have to accept about a 21 percent haircut voluntarily—is not going to be very popular.

Greece bank managers have said they expect private sector participation in the bond swap to reach about 80%. This is well short of the 90% Greece demanded last month. If Greece were actually to take a hard line on this, it would compromise an $185 billion piece of the bailout agreement.

This swap technically signals default anyway, so the failure to go through with it means we'd see a hard default rather than the managed, "selective" default outlined in the July 21 agreement.
The deadline for bondholders to declare interest in the plan is today.

Second, Greece could learn that it will not receive further aid funding from the ECB/EU/IMF "troika."
Superficially, this doesn't seem like a huge deal. The aid funding at stake is $11 billion, small really in comparison to the size of Greek debt ($644 billion in 2010).

However, failure to receive this funding would signal that Greece is not meeting its debt and privatization goals, and jeopardize support for the bailout agreement announced on July 21. Parliaments and governments across the eurozone are deciding whether to move forward with that this month.

Policymakers aren't supposed to meet again until September 14. In the meantime, Greece is examining its books. If it finds that its numbers will not pass muster, it could go ahead with default at any time.

The big story: Europe appears to be within days of some kind of breaking point. There have obviously been huge concerns about the next Greek bailout and whether it would happen (and with 2-year yields at 55% on Greek debt, it's obvious that the market has been skeptical for a while). Pre-market there was chatter about a Greek default as soon as this weekend. Then at around 9:20, it came out that a top hawk was leaving the ECB, further emphasizing the lack of cohesion at this crucial institution. And then worries got even more heightened when, this afternoon, it was reported that Germany was planning a fund of sorts to bail out its own banks, in the event of a Greek default. While it's good news that Germany is planning on ring-fencing its financial system, the news was taken as a further signal to the market that Greece is on the edge.

Let's go back a bit though: Last night we got the big jobs package from Obama, and initially it was taken as a fairly big "plus." Not only was it bigger than some had expected, but the GOP didn't line up to kill it right away, as some presumed they would. So there's some daylight on that front. Click here to see what economists thing about Obama's big announcement >

Initially the futures rallied nicely post-Obama, and they were still higher this morning, but eventually the freakout in Europe dragged down US markets.

Also at the same time as Obama, reports came out of a terrorist threat (specific and credible) that could coincide with this weekend's 9/11 anniversary. That never appeared to have a specific market impact, however.

And mostly that was it: Panic about Europe obviously overwhelmed any presumed additional marginal stimulus from Obama.

Final tally: Stocks got killed, the euro got crushed, and the dollar went wild, against both the euro and the Swiss Franc. Gold also had a really solid day. And of course, Treasury yields hit a brand new historical low.

On the corporate front, the big news is that layoffs at Bank of America might reach 40k.

For a reminder of what you should worry about in Europe, see here.

Why prepping matters: US natural disasters reach unprecedented high

2011-09-08T20:06:00.000-07:00

Part of the reason I created my COLLAPSE RPG is so you could safely simulate "what would you do" kinds of scenarios-whether real or imagined. I also wanted to show you why 'prepping' for trouble is important and what happens if you are not prepared. You can download my game FREE in the Department of Intelligence links to the right. Well certainly America is discovering why being prepared is important in a very real way:

There has been a natural disaster that has caused at least a billion dollars of damage inside the United States every single month so far this year. According to the National Oceanic and Atmospheric Administration, there have been 10 major disasters in the United States this year. On average, usually there are only about 3 major disasters a year. At this point, disasters are happening inside the United States so frequently that there seems to be no gap between them. We just seem to go from one major disaster to the next. Last year, FEMA declared an all-time record of 81 disasters inside the United States. This year, we are on pace for well over 100. We just got done dealing with Hurricane Irene, and now we are dealing with historic wildfires in Texas and unprecedented flooding up in the northeast part of the country. This has been the worst year for natural disasters in U.S. history, and we still have nearly four months left to go. Hopefully after everything that has happened this year it has become abundantly clear to all of us why we need to prepare for emergencies. The world is becoming an increasingly unstable place, and you never know what is going to happen next.

Thankfully, the U.S. has not experienced a disaster on the level of Hurricane Katrina so far this year, but what makes this year different is that we have never seen so many major disasters happen so rapidly. Since the beginning of the year we have had to deal with record-setting winter storms, nightmarish tornadoes, "once in a century" earthquakes, historic flooding all over the country, severe drought and some of the worst wildfires the U.S. has ever experienced.
Is there a reason why the United States is being hit by major disaster after major disaster or is all of this just a really unfortunately coincidence? The following are just a few of the nightmarish natural disasters that the U.S. has had to deal with so far this year.....MORE

EU Financial system doomed? EU break out into civil wars?

2011-09-06T17:31:00.000-07:00

SOURCE
The financial crisis in Europe has become so severe that it has put the future of the euro, and indeed the future of the EU itself, in doubt. If the financial system in Europe collapses, it is going to plunge the entire globe into chaos. The EU has a larger economy and a larger population than the United States does. The EU also has more Fortune 500 companies that the United States does. If the financial system in Europe breaks down, we are all doomed. An economic collapse in Europe would unleash a financial tsunami that would sweep across the globe. As I wrote about yesterday, the nightmarish sovereign debt crisis in Europe could potentially bring about the end of the euro. The future of the monetary union in Europe is being questioned all over the continent. Without massive bailouts, there are at least 5 or 6 nations in Europe that will likely soon default. The political will for continued bailouts is rapidly failing in northern Europe, so something needs to be done quickly to avert disaster. Unfortunately, as anyone that has ever lived in Europe knows, things tend to move very, very slowly in Europe.If the bailouts end and Europe is not able to come up with another plan before then, mass chaos is going to unleashed. Most major European banks are massively exposed to European sovereign debt, and most of them are also very, very highly leveraged. If we see nations such as Greece, Portugal and Italy start to default, we could have quite a few major European banks go down in rapid succession. That could be the "tipping point" that sets off mass financial panic around the globe.
Of course the governments of Europe would probably step in to bail out many of those banks, but when the U.S. did something similar back in 2008 that didn't prevent the world from plunging into a horrible worldwide recession.
Right now, the way that the monetary union is structured in Europe simply does not work. Countries that are deep in debt have no flexibility in dealing with those debts, and citizens of wealthy countries such as Germany are becoming deeply resentful that they must keep shoveling money into the financial black holes of southern Europe.
These bailouts cannot go on indefinitely. Political and financial authorities all over Europe know this and they also know that Europe is rapidly heading toward a day of reckoning.
The quotes that you are about to read are absolutely shocking. In Europe they openly admit that the financial system is dying, that the euro is in danger of not surviving and that the EU does not work in its present form.
The following are 20 quotes from European leaders that prove that they know that the financial system in Europe is doomed....
#1 Polish finance minister Jacek Rostowski: "European elites, including German elites, must decide if they want the euro to survive - even at a high price - or not. If not, we should prepare for a controlled dismantling of the currency zone."
#2 Stephane Deo, Paul Donovan, and Larry Hatheway of Swiss banking giant UBS: "Under the current structure and with the current membership, the euro does not work. Either the current structure will have to change, or the current membership will have to change."
#3 EU President Herman Van Rompuy: "The euro has never had the infrastructure that it requires."
#4 German President Christian Wulff: "I regard the huge buy-up of bonds of individual states by the ECB as legally and politically questionable. Article 123 of the Treaty on the EU’s workings prohibits the ECB from directly purchasing debt instruments, in order to safeguard the central bank’s independence"
#5 Deutsche Bank CEO Josef Ackerman: "It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels."
#6 ECB President Jean-Claude Trichet: "We are experiencing very demanding times"
#7 International Monetary Fund Managing Director Christine Lagarde: "Developments this summer have indicated we are in a dangerous new phase"
#8 Prince Hermann Otto zu Solms-Hohensolms-Lich, the Bundestag's Deputy President: "We must consider whether it would not be better for the currency union and for Greece itself to go for debt restructuring and an exit from the euro"
#9 Alastair Newton, a strategist for Nomura Securities in London: "We believe that we are just about to enter a critical period for the eurozone and that the threat of some sort of break-up between now and year-end is greater than it has been at any time since the start of the crisis"
#10 Former German Chancellor Gerhard Schroeder: "The current crisis makes it relentlessly clear that we cannot have a common currency zone without a common fiscal, economic and social policy"
#11 Bank of England Governor Mervyn King: "Dealing with a banking crisis was difficult enough, but at least there were public-sector balance sheets on to which the problems could be moved. Once you move into sovereign debt, there is no answer; there's no backstop."
#12 George Soros: "We are on the verge of an economic collapse which starts, let's say, in Greece. The financial system remains extremely vulnerable."
#13 German Chancellor Angela Merkel: "The current crisis facing the euro is the biggest test Europe has faced for decades, even since the Treaty of Rome was signed in 1957."
#14 Stephane Deo, Paul Donovan, and Larry Hatheway of Swiss banking giant UBS: "Member states would be economically better off if they had never joined. European monetary union was generally mis-sold to the population of the Europe."
#15 Professor Giacomo Vaciago of Milan's Catholic University: "It's clear that the euro has virtually failed over the last ten years, even if you are not supposed to say that."
#16 EU President Herman Van Rompuy: "We’re in a survival crisis. We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union."
#17 German Chancellor Angela Merkel: "If the euro fails, then Europe fails."
#18 Deutsche Bank CEO Josef Ackerman: "All this reminds one of the autumn of 2008"
#19 International Monetary Fund Managing Director Christine Lagarde: "There has been a clear crisis of confidence that has seriously aggravated the situation. Measures need to be taken to ensure that this vicious circle is broken"
#20 German Chancellor Angela Merkel: "The euro is in danger ... If we don't deal with this danger, then the consequences for us in Europe are incalculable."
Most of the individuals quoted above desperately want to save the euro. They are not going to go down without a fight. The overwhelming consensus among the political and financial elite in Europe is that increased European integration in Europe is the answer.
For example, EU President Herman Van Rompuy is very clear about what he believes the final result of this crisis will be....

"This crisis in the euro zone will strengthen European integration. That is my firm belief."

Many of the elite in Europe are now openly talking about the need for a "United States of Europe". Just consider what former German chancellor Gerhard Schroeder recently had to say....

"From the European Commission, we should make a government which would be supervised by the European Parliament. And that means the United States of Europe."

But as mentioned above, things in Europe tend to move very, very slowly. The debt crisis in Europe is rapidly coming to a breaking point, and it is very doubtful that Europe will be able to move fast enough to head it off.
What we may actually see is at least a partial collapse of the euro and a massive financial crisis in Europe first, and then much deeper European integration being sold by authorities in Europe as "the solution" to the crisis.
This would be yet another example of the classic problem/reaction/solution paradigm.
The "problem" would be a horrible financial crisis and economic downturn in Europe.
The "reaction" would be a cry from the European public for someone to "fix" things and return things back to "normal".
The "solution" would be a "United States of Europe" with much deeper economic and political integration which is something that many among the political and financial elite of Europe have wanted for a long, long time.
Right now, the people of Europe are very much opposed to deeper economic and political integration. For example, 76 percent of Germans says that they have little or no faith in the euro and one recent poll found that German voters are against the introduction of "Eurobonds" by about a 5 to 1 margin.
It looks like it may take a major crisis in order to get the people of Europe to change their minds.
Unfortunately, it looks like that may be exactly what is going to happen.

SOURCE
Any time a major bank releases a report saying a given course of action is too costly, too prohibitive, too blonde, or simply too impossible, it is nearly guaranteed that that is precisely the course of action about to be undertaken. Which is why all non-euro skeptics are advised to shield their eyes and look away from the just released report by UBS (of surging 3 Month USD Libor rate fame) titled "Euro Break Up - The Consequences." UBS conveniently sets up the straw man as follows: "Under the current structure and with the current membership, the Euro does not work. Either the current structure will have to change, or the current membership will have to change." So far so good. Yet where it gets scary is when UBS quantifies the actual opportunity cost to one or more countries leaving the Euro. Notably Germany. "Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade. If Germany were to leave, we believe the cost to be around EUR6,000 to EUR8,000 for every German adult and child in the first year, and a range of EUR3,500 to EUR4,500 per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. " It also would mean the end of UBS, but we digress. Where it gets even more scary is when UBS, like many other banks to come, succumbs to the Mutual Assured Destruction trope made so popular by ole' Hank Paulson : "The economic cost is, in many ways, the least of the concerns investors should have about a break-up. Fragmentation of the Euro would incur political costs. Europe’s “soft power” influence internationally would cease (as the concept of “Europe” as an integrated polity becomes meaningless). It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war." So you see: save the euro for the children, so we can avoid all out war (and UBS can continue to exist). The scariest thing, however, by far, is that for this report to have been issued, it means that Germany is now actively considering dumping the euro.
Executive summary:

Fiscal confederation, not break-up

Our base case with an overwhelming probability is that the Euro moves slowly (and painfully) towards some kind of fiscal integration. The risk case, of break-up, is considerably more costly and close to zero probability. Countries can not be expelled, but sovereign states could choose to secede. However, popular discussion of the break-up option considerably underestimates the consequences of such a move.

The economic cost (part 1)

The cost of a weak country leaving the Euro is significant. Consequences include sovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance. We estimate that a weak Euro country leaving the Euro would incur a cost of around EUR9,500 to EUR11,500 per person in the exiting country during the first year. That cost would then probably amount to EUR3,000 to EUR4,000 per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.

The economic cost (part 2)

Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade. If Germany were to leave, we believe the cost to be around EUR6,000 to EUR8,000 for every German adult and child in the first year, and a range of EUR3,500 to EUR4,500 per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. In comparison, the cost of bailing out Greece, Ireland and Portugal entirely in the wake of the default of those countries would be a little over EUR1,000 per person, in a single hit.

The political cost

The economic cost is, in many ways, the least of the concerns investors should have about a break-up. Fragmentation of the Euro would incur political costs. Europe’s “soft power” influence internationally would cease (as the concept of “Europe” as an integrated polity becomes meaningless). It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war.

A little more on that particularly troubling last point:

Do monetary unions break up without civil wars?

The break-up of a monetary union is a very rare event. Moreover the break-up of a monetary union with a fiat currency system (ie, paper currency) is extremely unusual. Fixed exchange rate schemes break up all the time. Monetary unions that relied on specie payments did fragment – the Latin Monetary Union of the 19th century fragmented several times – but should be thought of as more of a fixed exchange rate adjustment. Countries went on and off the gold or silver or bimetal standards, and in doing so made or broke ties with other countries’ currencies.

If we consider fiat currency monetary union fragmentation, it is fair to say that the economic circumstances that create a climate for a break-up and the economic consequences that follow from a break-up are very severe indeed. It takes enormous stress for a government to get to the point where it considers abandoning the lex monetae of a country. The disruption that would follow such a move is also going to be extreme. The costs are high – whether it is a strong or a weak country leaving – in purely monetary terms. When the unemployment consequences are factored in, it is virtually impossible to consider a break-up scenario without some serious social consequences.

With this degree of social dislocation, the historical parallels are unappealing. Past instances of monetary union break-ups have tended to produce one of two results. Either there was a more authoritarian government response to contain or repress the social disorder (a scenario that tended to require a change from democratic to authoritarian or military government), or alternatively, the social disorder worked with existing fault lines in society to divide the country, spilling over into civil war. These are not inevitable conclusions, but indicate that monetary union break-up is not something that can be treated as a casual issue of exchange rate policy.

Even with a paucity of case studies, what evidence we have does lend credence to the political cost argument. Clearly, not all parts of a fracturing monetary union necessarily collapse into chaos. The point is not that everyone suffers, but that some part of the former monetary union is highly likely to suffer.

The fracturing of the Czech and Slovak monetary union in 1993 led to an immediate sealing of the border, capital controls and limits on bank withdrawals. This was not so much secession as destruction and substitution (the Czechoslovak currency ceased to exist entirely). Although the Czech Republic that emerged from the crisis was considered to be a free country (using the Freedom House definition), with political rights improving relative to Czechoslovakia (also considered to be a free country), Slovakia saw a deterioration in the assessment of its political rights and civil liberties, and was designated “partially free” (again, using Freedom House criteria).

Similarly the break-up of the Soviet Union saw authoritarian regimes in the resulting states. Of course, this was not a change from the previous status quo, but that is not the point. The question is not how a liberal democracy develops, but whether a liberal democracy could withstand the social turmoil that surrounds a monetary union fracturing. We lack evidence to support the idea that it could.

Even the US monetary union break-up in 1932-33 was accompanied by something close to authoritarianism. Roosevelt’s inauguration was described by a contemporary journalist as being conducted in “a beleaguered capital in wartime”, with machine guns covering the Mall. State militia were called out to deal with the reactions of local populations, unhappy at what had happened to the monetary union (and specifically their access to their banks).

Older examples are less helpful, as they tend to be more akin to fixed exchange rate regimes under a gold standard or some other international monetary arrangement. Nevertheless, the Irish separation from the UK, or the convulsions of the Latin Monetary Union in Europe (particularly around the Franco-Prussian war in 1870 and its aftermath) saw monetary unions fragment with varying degrees of violence in some parts of the union.

Writing in 1997, the Harvard economist Martin Feldstein offered a view that seems to be somewhat chillingly precognitive. He said “Uniform monetary policy and inflexible exchange rates will create conflicts whenever cyclical conditions differ among the member countries... Although a sovereign country... could in principle withdraw from the EMU, the potential trade sanctions and other pressures on such a country are likely to make membership in the EMU irreversible unless there is widespread economic dislocation in Europe or, more generally, a collapse of the peaceful coexistence within Europe.” (emphasis added).

As for what happens if UBS, and the Euro Unionists lose the fight for the euro:

Our base case for the Euro is that the monetary union will hold together, with some kind of fiscal confederation (providing automatic stabilisers to economies, not transfers to governments). This is how the US monetary union was resurrected in the 1930s. It is how the UK monetary union, and indeed the German monetary union, have held together.

But what if the disaster scenario happens? How can investors invest if they believe in a break-up, however low the probability? The simple answer is that they cannot. Investing for a break-up scenario has not guaranteed winners within the Euro area. The growth consequences are awful in any break-up scenario. The risk of civil disorder questions the rule of law, and as such basic issues such as property rights. Even those countries that avoid internal strife and divisions will likely have to use administrative controls to avoid extreme positions in their markets.

The only way to hedge against a Euro break-up scenario is to own no Euro assets at all.

Alas, this will be the final outcome. Unfortunately trillions more in taxpayer capital will be lost before we get there.
In the meantime, enjoy as UBS just unwittingly announced the final countdown for the EUR.

Economic Collapse, it's when not if, according to Goldman Sachs

2011-09-01T16:56:00.001-07:00

SOURCE
Goldman Sachs is doing it again. Goldman is telling the public that everything is going to be just fine, but meanwhile they are advising their top clients to bet on a huge financial collapse. On August 16th, a 54 page report authored by Goldman strategist Alan Brazil was distributed to institutional clients. The general public was not intended to see this report. Fortunately, some folks over at the Wall Street Journal got their hands on a copy and they have filled us in on some of the details. It turns out that Goldman Sachs secretly believes that an economic collapse is coming, and they have some very interesting ideas about how to make money in the turbulent financial environment that we will soon be entering. In the report, Brazil says that the U.S. debt problem cannot be solved with more debt, that the European sovereign debt crisis is going to get even worse and that there are large numbers of financial institutions in Europe that are on the verge of collapse. If this is what people at the highest levels of the financial world are talking about, perhaps we should all start paying attention.
There is a tremendous amount of fear in the global financial community right now. As I wrote about the other day, the financial world is about to hit the panic button. Things could start falling apart at any time. Most of these big banks will not admit how bad things are publicly, but privately there is a whole lot of freaking out going on.
According to the Wall Street Journal, Brazil believes that "as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China's growth may not be sustainable."
Perhaps most startling of all is what the report has to say about the debt problems of the United States and Europe.
For example, this following excerpt from the report sounds like it could have come straight from The Economic Collapse Blog....

“Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency?”

Remember, this statement was not written by some guy on the Internet. A top Goldman Sachs analyst put it into a report for institutional investors.
The report also goes into great detail about the financial crisis in Europe. Brazil writes about how the euro is headed for trouble and about how dozens of financial institutions in Europe could potentially be in danger of collapse.
But in any environment Goldman Sachs thinks that it can make money. The following is how Business Insider summarized the advice that Brazil gave in the report regarding how to make money off of the impending collapse in Europe....

Buy a six-month put option on the Euro versus the Swiss Franc, thus betting the Euro will drop against the Franc (the Franc being the currency that an official Goldman report recently referred to as the most overvalued in the world)
Buy a five-year credit default swap on an index of European corporate debt—the iTraxx 9. This is a bet that some of these companies will default, and your insurance policy, the CDS, will pay off

This is so typical of Goldman Sachs. They will say one thing publicly and then turn around and do the total opposite privately.
For example, prior to the financial crisis of 2008, Goldman Sachs was putting together mortgage-backed securities that they knew were garbage and marketing them to investors as AAA-rated investments. On top of that, Goldman then often privately bet against those exact same securities.
The CEO of Goldman Sachs has even acknowledged that the investment bank engaged in "improper" behavior during 2006 and 2007.
For much more on the history of all this, please see this article: "How Goldman Sachs Made Tens Of Billions Of Dollars From The Economic Collapse Of America In Four Easy Steps".
So will Goldman Sachs ever get into serious trouble for any of this?
No, of course not.
Yeah, they will get a slap on the wrist from time to time, but the reality is that the top levels of the federal government are absolutely littered with ex-employees of Goldman Sachs. Goldman is one of the "too big to fail" banks and they are going to continue to do pretty much whatever they feel like doing.
Sadly, the power of the "too big to fail" banks just continues to grow. At this point, the "big six" U.S. banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to approximately 60 percent of America's gross national product.
Goldman Sachs was the second biggest donor to Barack Obama's campaign in 2008, so don't expect Obama to do anything about any of this.
We have a financial system that is deeply, deeply corrupt and all of that corruption is a big reason why things are falling apart.
Sadly, the 54 page report mentioned above is right - we really are facing a global debt meltdown and we really are heading for an economic collapse.
You aren't going to hear the truth from the mainstream media or from our politicians because "keeping people calm" is much more of a priority to them than telling the truth is.
The debt crisis in the United States is unsustainable and the debt crisis in Europe is unsustainable. Right now we are in the calm before the storm, and nobody knows exactly when the storm is going to strike.
But let there be no doubt - it is coming.
The amazing prosperity that we have enjoyed for the last several decades has largely been a debt-fueled illusion. It was a great party while it lasted, but now it is coming to an end and the aftermath of the coming crash is going to be absolutely horrific.
Keep watch and get prepared. We don't know exactly when the collapse is going to happen, but it is definitely on the way and now even Goldman Sachs is admitting that.

When enough is too much

2011-08-20T17:46:00.000-07:00

Victor Davis Hanson is an author, historian, conservative political thinker, and a raisin farmer. I graduated a historian from college, and VDH is one of my inspirations for doing so. To give you an idea of his political thought and writing, enjoy this bit of logic and clarity from his Private Paper's blog which I give my highest recommendation:

Consider the myriad paradoxes of the Obama age. Unprecedented government borrowing is out of control, unsustainable, and finally causing financial markets to panic. Yet we are told that the necessary cutting ahead will further stall the stalled economy. We went from $9 trillion to $14 trillion in aggregate debt in order to jump-start a sluggish recovery, and failed — only to be warned that if we do not proceed to incur even more debt — from $14 trillion to $16 trillion — we will stall the stalled effort to restart the stalled economy. So more of what did not work most surely will work?

The Left insists that the real problem is not unmanageable debt, but near-record unemployment, as if the two were unrelated. Most Americans apparently once agreed, as Obama easily borrowed nearly $5 trillion in his first two and a half years in office, supposedly to stimulate employers into hiring workers. We are now told the US must borrow more, and should worry less, not more, about paying the money back. The logic of the new Keynesians is that stimulus is never quite achieved because indebtedness is never quite large enough — an Achilles-and-the-tortoise paradox that only insolvency will finally dispel.

Rioting in London and flash mobbing in American cities have raised another paradox: Does contemporary looting and violence follow from physical deprivation or from a boredom, envy, and anger caused by too many subsidies and too little personal initiative and self-reliance? We know that the more we ensure that young people have generous unemployment insurance and government money for housing, food, and education, the more they are likely not to get up at 6 a.m. and take an extra class or look for a job. And yet the more we provide such bread-and-circuses dependencies, the more it becomes dangerous to question such life support. Ask the Emperor Justinian, who cut back on a bloated civil-service and entitlement bureau — and earned the Nika riots, which almost toppled his regime. So even as we suspect that the welfare state is unsustainable, we are told that it alone can prevent social unrest — which we suspect is currently brought about by the welfare state.

His history books and political commentary are must reads, so do yourself a favor and start!

Dow drops over 600 points today...time to go to the bullpen.

2011-08-08T19:05:00.000-07:00

So we have lost 1100 points in two days (Friday/Monday) and the President's speech did not slow the decline. The absence of leadership from the White House will insure the decline continues. This is a worry but just one of many:

1. Riots are spreading in England
2. Italy and Spain are still in deep financial trouble
3. France is going into recession and could be the next country in trouble
4. World Wide Markets (Europe and Asia) continue to decline
5. Talk of QE3 being announced tomorrow are growing louder.

Please realize further QE programs degrade the worth of the dollar and further erodes the individuals wealth. So $1 may become worth .50 cents meaning you will have to spend twice as much to get the same things (bread, gas, clothes, etc.) It may temporarily ease the slide, but the direction is still down and it will make the fall steeper and deeper.

I do have a recommendation for you, but this is simply my own suggestions-not rules, not guidelines, not mandates, so decide for yourself, read, research and then take action. Assuming the economy is going to grow more unstable globally:

Buy extra food now. Prices are increasing globally and as your dollar will buy less long term its time to invest in chow now. You can't eat gold, you can;t eat silver, and history shows time and again that people will give you anything they have for food when times are tough. Tales of urban Germans giving away family jewels for sacks of potatoes at the end of WW2 are not simply "stories" its a lesson. What to buy? Up to you but I suggest:

1) buy what you like to eat. If it's a soup or other canned item you like, buy 2 or 3 instead of just 1
2) buy long term storage items canned goods are a great start, freeze dried or dehydrated can be added to this
3) buy variety-buckets of wheat, rice, or oatmeal are fine so long as you can make 30 different things out of them.
4) do a little bit each week starting this week.

There are lots of reasons (like natural disasters, earth quakes, storms,) to have a pantry stock. There are lots of great resources out there to help guide you. If you'd like me to post some-let me know! Remember you don;t have to do it all right now, just start, make a goal of having 2 extra days worth of food (3 meals per person) at the end of each week. At the end of a month you have one weeks worth of extra food for everyone in your family-and 1 bonus day worth of meals to share with someone else in need, or just in case you need it per person. I call it the Bullpen Plan.

Solar Storm, S&P Credit rating, Milwaukee Mayhen, Hot times for Hotspurs...what's next?

2011-08-06T19:44:00.000-07:00

Wow what a week...and it looks like more trouble to come.

First we have the Debt limit agreement this week...I'd say hooray, but it was an ill conceived agreement.

Then Europe and the BRIC countries are heading into trouble

Spain has protests against political/ economic situation

Israeli's are protesting their economy/ high cost of living

Then a U.S. credit downgrade by the S&P

Now we have riots in North London

Mob violence outside the Wisconsin State Fair

and did I mention the solar storm hitting the planet next week?

Well as fun as all of that is, I thought I'd also take time to recommend a new book coming from Mr. Mark Steyn next week. Mr. Steyn's wit and wisdom are legendary and he uses wry humor to illustrate the serious political and social issues of the day. Unlike John Stewart, Steyn's observations are poignant and insightful. The subject for his new book (out 8/9/11)

Like America's political class, I have also been thinking about America circa 2020. Indeed, I've written a book on the subject. My prognosis is not as rosy as the Boehner-Obama deal, as attentive readers might just be able to deduce from the subtle clues in the title: “After America: Get Ready For Armageddon.”

Oh, don't worry, I'm not one of these “declinists.” I'm way beyond that, and in the express lane to total societal collapse. The fecklessness of Washington is an existential threat not only to the solvency of the republic but to the entire global order. If Ireland goes under, it's lights out on Galway Bay. When America goes under, it drags the rest of the developed world down with it.

What's disturbing to me is for the last 6 years or so Glenn beck has warned of such times and events. Now many who waited on the sidelines or downplayed some of his claims-seem to be voicing similar concerns and warnings. Note finding a group in agreement with you does not equal truth (memo to Paul Krugman) Even so, I think the situations occurring and the blind hope and lack of preparation for potential trouble is unnerving.

I think the children's parable of the ants and the grasshopper especially relevant in these times. Funny we were all taught this as children-I guess some of us forgot...

The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away. Come winter, the ant is warm and well fed. The grasshopper has no food or shelter, so he dies out in the cold.

Winter is coming...

Debt limit crisis is over...now things get interesting...

2011-08-02T17:51:00.000-07:00

Well I was wrong, thankfully! I assumed a more direct approach by the President and his allies. So while this has passed, there may still be turmoil on the horizon...

Europe is still sinking fast(er)

This is also the 8th straight down day for the Dow, which is the first time since this has happened since October 2008. Uh-oh.

But let's take a closer look at the new deal that was signed by the President today:

Don’t be fooled. We’ve just been betrayed by Washington.

A deal on the debt ceiling is near and Washington still hasn’t gotten serious about the fundamentals. It hasn’t gotten serious about default. It certainly hasn’t gotten serious about the future. When Harry Reid hails a “bipartisan compromise” you know we’re doomed.

Republicans and Democrats have just negotiated away the future of our children behind closed doors. The big compromise on Capitol Hill features elaborate triggers, tranches, Hornswogglers, Snozzwangers, Super Duper Commissions that will make the Snozzberries taste like Snozeberries, and a whole bunch of other convoluted gibberish that will, no doubt, come with loopholes and create entire new bureaucracies. What it doesn’t do is fix the problem.

The fact is Moody’s has already warned us that no one has put a plan on the table that comes close to solving our long-term problem. Moody’s will downgrade us. This could happen tomorrow, in six months or maybe a year from now, but at some point in the near future it’s going to happen. And it’s going to hurt. So we must be prepared.

Imagine your credit card’s interest rates constantly rising. Imagine high inflation eating away at your savings accounts, retirement funds and salary — if you’re lucky enough to have one these days. Imagine the interest rate on your mortgage rising and compounding until there was no hope of escaping debt. Imagine that fewer and fewer people are willing to lend you any money as your credit rating takes a dive.

Now imagine we’re talking about 15, 25, 100 trillion dollars and your Medicare, Social Security and Treasury bonds.
Those tanks and missiles Republicans say we need? No more. Those food stamps and green-energy boondoggles Democrats say we can’t live without? Forget it. We won’t be able to afford them. It won’t matter how many prime time speeches the president gives or how dangerous the world gets. The unsustainable cost of irresponsible governance mean everyone loses.
And by everyone, I mean the whole world.

Remember the saying: as Greece goes so goes the world? The United States economy constitutes around 25 percent of the world’s GDP. What happens to global economy when we default? Everyone will feel it. After all, who’s going to send billions in weapons to Egypt’s military regime to help it quell the “democratic” Arab street when we can’t even pay the janitors at the IRS office space?

So what is the point of all the drama in Washington? As best as I can tell most politicians are scared stiff that they might have to have a substantive debate about the debt ceiling during the election season. Other than that, we’re back where we started.
For one, any promise of future cuts is as about as rock solid as a politician’s word. Experience has taught us every year some “unprecedented” emergency will require us to spend hundreds of billions, if not trillions, we don’t have to “fix.” Mark my words, the war (I’m sorry … “kinetic military action”) that no one even understands in Libya will expand and then all the promises forgotten.

It’s true that seven or eight months ago Democrats were still saying we needed another stimulus package and calling for new spending. Now, we’re not just talking about whether to cut but about how much to cut. And it’s great news that Washington has made significant progress in moving the Balanced Budget Amendment — the only real and lasting solution to this crisis. Nevertheless, the fact remains that this deal raises the debt limit by about $2.5 trillion dollars without making substantial and immediate cuts.

Congressman Jason Chaffetz, in fact, explained that the first year of spending cut is $7 billion and when you consider that we deficit spend $4 billion a day, the real savings in the first year of this deal covers only two days of spending.
Promises mean nothing in Washington. We need genuine, transformational reform and real spending cuts today, not a strategic Republican victory. The time for political expediency is over.

Isn’t it curious that when Democrats wanted to push through a $1 trillion stimulus plan that enriched every social engineering project in the country they got it done? Isn’t it amazing that Democrats had the willpower to ram through health unpopular Obamacare which changed our entire health care system without any compromise whatsoever?
Why can’t Republicans find a similar backbone? Why can’t they fight for the people who elected them? Are you telling me they can’t find significant waste and fraud in the Federal government right now?
The answer is simple.

You cannot spend more than you earn. You cannot run up the largest credit card bill in human history. You want more revenue? Stop chasing income earners overseas by threatening them with higher taxes, stop inflating their energy costs and stop punishing them with never-ending regulations. Mr President, put down your socialist mop! Stop with the Cloward and Piven floor wax.

And then balance the budget, cut back the spending and reform entitlements.

--Glenn Beck

U.S. Debt Default and where it could lead: Occupo Vicis!

2011-07-24T06:46:00.000-07:00

It's 4.30 am and I have awoken with an epiphany. Funny how these things come out of the blue, and I can't tell if the situation I am about to outline is probable, possible, or just passing fancy. Read, research and as always decide for yourself.

In summary I think the following could happen:
No agreement is reached in Congress and the U.S. defaults. Markets tank globally, and in an emergency maneuver, the President raises the debt ceiling on his own. Hue and cry is heard in certain section of America, court cases are started, but the markets settle and in a few months everything is back to normal. Congress rubber stamps the decision for the good of the country and then tries to use the abuse of authority to paint the President as a demagogue. It does not work as people are happy with stability and see the Republicans as ineffective and comments against Obama's "decisive action" as politicking. All the while few note the Rubicon has again been crossed, and another republic has been tossed into the dust bin of history.

How did we get here Marc Antony? Read on....

The U.S. faces a debt crises, of sorts. The country isn't going to go bankrupt...yet...and our government has the money to pay its creditors, but at the cost of a loss of internal programs. The problem is, once a debt ceiling is breached, regardless of our ability to pay creditors, we have no internal agreement on how to move forward (cut, cap, trade, or raise) so it makes America's financial situation world wide-unstable. That spooks folks, especially the markets globally, and could cause another global financial panic.

We have been here before and had a government shutdown during President Clinton's time in office--the world did not end. Things though are remarkably different just 15 years later...

President Obama's former Chief of Staff Rahm Emmanuel coined a phrase early on in the Obama presidency, "Never let a crisis go to waste." Seems harmless enough and the phrase has been spun to mean all sorts of things, but I believe the original intent is true, "A crisis is an opportunity to get your will done." You see many people act irrationally out of fear, and a national crisis usually leads to some bad decision making.

History is replete with leaders taking advantage of a crisis and spinning it into their own narrative to get their will made real. There are some people who argue W. Bush used 9/11 to go back to Iraq and finish the job his father left undone. Some others argue Pearl Harbor was allowed to be bombed in order to force America to enter WW2. You can look for more examples in the rise of Hitler, Lenin, Napoleon, and on and on including Caesar. In all of these situations, a crisis occurred and out of it an action was taken by a leader which materially changed the course of that nation's endeavors. I beleive the U.S. Debt crisis could pose a similar moment for President Obama and The United States of America.

To illustrate this let's start with the "kinetic military action" in Libya. No let's go back a bit to President Obama's taking over the "War on Terror." During the Presidency of George W. Bush, it was common to hear on the news stories of soldier deaths, footage of the war in Afghanistan and Iraq, and a weekly resuscitation on some channels of the names of those killed in action. In addition groups like Code Pink and other anti-war protesters were featured on the news and in rallies and marches nationwide. The wars are still occurring, but where are the news stories and all the protestors?

Since President Obama's presidency began, the war footage, names of the dead, or really even reporting on the war(s) has become quite muted. All of this while April 2011 was the deadliest month in Iraq since 2009, and June 2011 was the deadliest Month in Iraq since 2008! I have not seen major reports on this growing trend of violence, nor protests from Code Pink or other Anti-War forces who were so vocal during George W. Bush's Presidency. You need to ask yourself why that is...

Worse, the President began a "kinetic military action" in Libya. Under the War Powers act, presidents must terminate a mission 60 or 90 days after notifying Congress that troops have been deployed into hostilities, unless lawmakers authorize the operation to continue. Whether you agree with it or not is irrelevant, it's the law. President Obama claims War powers does not apply as it is done under the auspices of U.N. approval, done in conjunction with NATO, and isn't really a war anyway. Here we are in the end of July and the kinetic military action is still ongoing, and congress backed down and supported the President's take on the matter. Apparently all the "no war for x" crowd are on summer holiday, because they seem to have completely taken a pass on Libya. I guess you can't find any snappy signs or stickers for "No kinetic military actions in my name" or "No kinetic military actions for what exactly?" As to Congress? So much for check and balance I guess.

Now let me jump to the debt crises. Way back in 2006 a then Senator Obama voted against a debt limit hike, similar to the one he is now asking to be passed. The President has said his refusal to vote for it in 2006 was a mistake. Wait the joke gets funnier, you see the funny thing is the Republicans voted for the debt limit hike then, but now not so much. Still waiting for an apology from those who voted for it then...

Then President Obama began his presidency in 2009 claiming he would cut the deficit in half by then end of his first term. News flash: that didn't happen.-and still hasn't-happened. Instead we have a semi, soon to be full, nationalized healthcare system....along with more and more government spending. Anyway all the largesse has brought us to another debt ceiling issue, and the current crisis. So saddle up and let's get to the (potential) Rubicon moment shall we?

Back when Rome was a republic, there was a stated boundary that did not allow a leader to march his armies across the Rubicon river into Rome. To do so was treason. Caesar having finished campaigns in Gaul and beaten Vercingetorix, was summoned back to Rome and was going to be stripped of his power (and armies) because the senate (and others) had grown fearful of his popularity and power. Caesar came back to Rome, crossed the Rubicon with his army, and civil war broke out leading to the end of the Roman Republic and the instillation of Caesar as emperor. Caesar is said to have remarked upon crossing the Rubicon "Alea iacta est" or "the die is cast." Had Rahm Emmanuel been at Caesar's side he may have said, "Occupo Vicis!" or "seize the opportunity!" President Obama may wish to replace E Pluribus Unum with that phrase.

Here we are at zero hour of our current debt crisis and although Republicans and Democrats, House and Senate, each wrangle over offers and plans the President waits. I do not mean that he is inactive at all, because when they get close-he seems to "change the goal line" and talks fall a part. Thus he can blame Republicans or the Speaker for being intractable and make them come to him again with another plan. The house passed "cut, cap, and balance" but the Senate is not going to pass it-strike one for fixing the debt. There is a Gang of Six plan that seemed likely to work, but talks broke down with the President before the weekend. I do not believe he is a sincere negotiator because as the deal was close to done, he changed the goal line and it blew up. Last, and most disturbing is the McConnell Plan. This is the Rubicon moment writ large if it comes to pass.

You see Congress controls the purse strings, the McConnell plan would give that power from Congress and allow the President to do so. So not only has Congress during the first 2 years of the Obama Presidency failed to call him to account for his "kinetic military action" they now may give over their budgetary powers as well. Why would they do that? Politics. In McConnell's estimation, the entire fiscal problem then becomes Obama's and Republicans can wash their hands of it. Historically speaking (outside George Washington) no other leader has given up power once it is given to them. That Obama should get both military control and now budgetary control in effect would leave congress pretty well neutered. It is a Rubicon moment when America may steer away from being a check and balance republic to something else.

Some argue article 4 of the 14th amendment allows the President to raise the debt limit anyway:

4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

I don't see that interpretation at all, but it is interesting that if for some reason Senator McConnell's abdication of Congressional authority fails, this is already being discussed for use and is in the bullpen.

In the end, the President can afford to wait and will drag out the process. In doing so he will and is actively going to force a default. The markets globally will tank, this will cause people to panic. In order to solve the crisis quickly, for the good of world markets, the President will get the power to raise the debt ceiling without Congressional approval, except for rubber stamping the act after it is done. Thus the United States further distances itself from being a republic and edges towards something altogether different and historically speaking, dangerous.

Prepare for U.S. Default? Never let a crisis go to waste...

2011-07-15T17:05:00.000-07:00

The Unites States of American stands at a crossroads. one with long term ramifications to our republic. I think it is a crisis point, and one where we turn towards or further from our founding principles. To illustrate this I have reprinted below an open letter from Judge Andrew Napolitano to Speaker of the U.S. house of Representatives John Boehner (R) Ohio. Judge Napolitano illustrates the nature of the problem, but goes beyond the debt limit itself to its importance to America and its ideals as a country.

Dear Mr. Speaker,

When the Founders at the Constitution Conventional in 1787 created the House of Representatives, it was fashioned to act as the voice of the people within the institutional checks and balances of the Federal Government. That's why the entire House faces reelection every 2 years. That's why Constitutionally, you don't have to even be a member of Congress to serve as speaker. And that's why the Constitution allows for thousands of members of the House for our current population. It is the people's house, and the people spoke last November. They cried out against a government completely out of control. After President Bush grew the U.S. debt by $7 trillion dollars in 8 years in office, and President Obama added $4 Trillion in just 2 years in office, the people cried out against big-government policies that are sabotaging the economy and taking over our lives. And because they cried out, you are no longer just John Boehner from Ohio. You are now the second in line to succeed to the presidency. You are the Speaker of the House of Representatives.

Mr. Speaker, the House of Representatives has just 8 working days left before the August 2nd debt ceiling deadline, and by wide margins in whatever way the question is asked, Americans do not want to see the debt ceiling raised. They're sick and tired of paying interest on borrowed money; money borrowed in their name. The Federal Government borrows so much money from so many sources, Mr. Speaker, that no-one knows for sure just how much it owes to its lenders. It already appears that it has exceeded the legal limit set by the congress at $14.294 trillion, and they actually at this moment in time are closer to $14.5 trillion. The White House is putting intense pressure on you and on Congress to raise that limit. The President's apologists have even suggested invoking the 14th amendment to bypass the will of Congress and borrow money without legal authority. Given the way the White House has run roughshod over your House in the matter of the "not-war" in Libya that our military is still "not" engaged in, the word of the President's lawyers that there is no presidential power in the 14th amendment to borrow money on his own can hardly be trusted. This is a president who does not regard the Constitution as a limit on the exercise of governmental power. But the President can only get away with violating the Constitution, Mr. Speaker, if you let him do so.

If you stand up for the will of the people, you will restrain him. This is the moment of truth for the Congress, Mr. Speaker. The scare-mongers and the chicken-littles in DC will tell you that the sky will come tumbling down if the debt ceiling isn't raised, even though your colleagues, Senator Pat Toomey and Rep. Tom McClintock, have introduced legislation that would prevent the United States from defaulting on its debt obligations.

I have two words for you, Mr. Speaker. Stop it. That's right, just stop it. For too long our government has spent beyond its means and in our names, sinking us and generations as yet unborn into deeper and deeper debt. And you, Mr. Speaker, can stop it. The President stands with the big-business, big-banks, big-government complex, and against the American people. He's even prepared to defy the laws of economics. But the American people are not ignorant as he thinks they are, and you know that.

Mr. Speaker, you have the opportunity to do something that no standard bearer of small government has ever been able to do in our modern era; get the government to live within its means. You can do it by standing firm with your colleagues in the Congress who are leading the call for change. You can stop it. You can force the Federal Government to make the difficult decisions to bring itself within its means and begin to loosen the chains of debt that have been foisted on our country by a centuries worth of progressive big-government architects. End it this summer, Mr. Speaker. Stop it. Tell the President, "not a penny more." Stand up for the American people, bring government within its means, and begin the restoration of our republic.

If you do this Mr. Speaker, if you restrain the federal beast, you will become one of history's great champions and heroes of freedom. If you don't, we'll all go through this again the next time a president wants to spend beyond the government's means and chain us all down to more debt.

Mr. Speaker, don't let us down.
-Judge Andrew P. Napolitano

Trouble in Italy?

2011-07-10T11:42:00.000-07:00

We've seen Portugal downgraded, and now Italy is in a mess as well. The problem with any bubble is the bigger it gets the bigger the pop. Greece is the canary in the coal mine and as the trouble begins hitting the breaking points in countries beyond Greece, there will not be a will nor way to stave off the trouble.

SOURCE

Yep, Italy is suddenly a crisis country. EU President Herman van Rompuy has called an emergency meeting for Monday to discuss the Italian contagion, according to Reuters.
A combination of economic and political factors has seen a sharp selloff in stocks, and a surge in yields.
The country is also getting caught up in a continent-wide game of chicken, that started, really, when French banks broached the idea of haircuts for Greek debt holders.
A recent strategy note from Duetsche Bank's Colin Tan and Jim Reid nicely summarizes the state of play in Europe, when it comes to Greece, the rest of the PIIGS, and the bailouts:

Although it was another day of rule changes in Europe (ECB suspending the minimum credit rating threshold on Portuguese bonds following Moody’s downgrade) it was surprising just how firm Trichet was about how the ECB would not stand for a PSI (private sector involvement) solution that triggered a 'Selected Default' rating from even one rating agency. The banks and EU officials made no progress yesterday so we still have no final word on specific mechanics around the PSI require to secure a second Greek bailout. Perhaps as suggested by the Dutch Finance Minister yesterday it was “unrealistic” to expect significant voluntary participation as he called for mandatory participation even if it led to credit rating downgrades. Clearly as the facts and circumstances change so might the ECB's current hard line stance but we believe they are clearly trying to ensure that those negotiating are left in no uncertain terms as to their position. It will be interesting to see who blinks first? The governments, the private sector, the rating agencies or the ECB?

It seems the events of the past two weeks -- which have seen major deterioration in Portugal in Italy -- has really spooked Europe over this idea of private sector haircuts.
As terror over the Greek debt crisis cools momentarily, everyone's suddenly paying attention to Italy. Its market is diving, people are dumping Italian banks, and yields are shooting up.
Italy's economy is the fourth-largest in the European Union, and its debt burden -- wavering at about $171 billion -- shows no signs of subsiding, regardless of harsh austerity cuts.
Italy's economy has deep-seated structural problems that are not going to go away by taking away the pocket book. Indeed, they may even get worse.

So how did Italy get here? SOURCE

Too much emphasis on family means lots of small, privately owned businesses and few large, publicly owned companies.

Image: Wikimedia Commons

The Borsa Italiana - Italy's main exchange - consists of only 331 companies.
Source: BorsaItaliana.it

This means that not a lot of women participate in the workforce.

Image: ImSickOf.com

Only 51.6% of Italian women participate in the workforce. (That's the third-lowest rate among OECD countries.)
Source: OECD Statistics

And most of the largest companies are formerly state-owned banks and utilities.

Image: D Sharon Pruitt via Flickr

Italy has little industrial presence in chemicals, pharmaceuticals, computers, and even food processing. Source: The Economist

Powerful entrepreneurial guilds raise barriers to entry and stifle competition.

Image: Patrik Axelsson on Flickr

Even baby sitters and cab drivers have such associations.
Source: The New York Times

And because of guild rules, it's difficult to fire people. The solution? Don't hire!

Image: YouTube

Full-time workers in firms of more than 18 staff members essentially get tenure.
Source: The New York Times

So you've got incredibly low labor mobility.

Light green means least movement.

Image: <="" a="">

<="" a="">In Italy, nobody moves! Not even between counties.
Source: European Commission

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And -- because they can't get a job and move up the ladder -- immigrants aren't replacing Italy's aging population.

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<="" a="">Image: <="" a="">

<="" a="">No wonder all the Tunisians are going to France.
Source: European Comission

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The government is also huge...

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<="" a="">Image: Work for All with OECD statistics

Public spending accounted for 51.7% of GDP in 2009.
Source: OECD Statistics

Particularly when Prime Minister Berlusconi makes a habit of appointing showgirls to powerful posts.

He tapped Mara Carfagna to be the Minister For Equal Opportunity and a member of his cabinet.

Add that to a notoriously slow judicial system...

The first round of the Amanda Knox trial never met more than three times per week. Because a lawyer for the appeal is a member of Parliament, the newest round only meets on Saturday mornings.
Source: Rolling Stone

And the fact that it's harder to do business in Italy than in any other OECD country (okay, well except Greece)...

Italy ranks #80 on the World Bank's list, meaning it's more difficult to do business in Italy than in Namibia.
Source: DoingBusiness.org

And high energy costs...

Image: frankh on Flickr

It is more expensive to purchase electricity as an industrial producer in Italy than it is in any other EU state.
Source: Energy.eu

Plus an under-developed tourism industry...

Image: Wikimedia Commons

In 1980, Italy was Europe's top tourist destination, with 9% market share. Now it can boast just 5% -- on par with China -- behind Spain and France.
Source: ITALY Magazine

And the fact that no one pays taxes...

The "bocca di leone" at the Palazzo Ducale in Venice denounces tax evaders.

Image: Son of Groucho on Flickr

Tax evasion costs the Italian government an estimated €100 billion per year in revenues.
Source: The Economist

And you've got a SITUATION.

Image: AP Images

Mike would know.

Essentially, Italy's just not growing anymore.

Image: Google Public Data

Italy's annual growth rate has been under 4% since 1988.
Source: World Bank

But will Italy break the euro?

Italy's gross public sector debt amounted to about 120% of its GDP.

Foreigners (yellow) own less of the debt than in other large EU countries.

Image: Eurostat

But as much as 65% of this debt is owned by Italian institutions and individuals.
Source: Financial Times

And the government could sell off some of its assets to pay down its debt.

One of these companies is Ferrovie dello Stato, the national railroad group.

Image: grouchomax on Flickr

Thinktank Privatization Barometer suggested that Italy's government could raise up to €30 billion by privatizing three of its state-owned enterprises. This move doesn't sound likely, though.

But youth unemployment is through the roof...

Image: AP

28.8% of 15-24 year-olds were unemployed in Q1.
Source: Italian National Institute of Statistics

Stocks of the five largest Italian banks are in free fall...

Image: AP

Their stocks have lost 27% on average since the beginning of the year.
Source: The Wall Street Journal

And political turmoil may jeopardize austerity measures.

Though Berlusconi said he will step down in 2013, he is currently caught up in a sex scandal, might be guilty of tax fraud, and is trying to weather increasing conflict with both his coalition ally and his finance minister.

And two recent negative outlooks by S&P's and Moody's suggest that Italy is headed for a downgrade.

Image: Lara604 on Flickr

Moody's is currently reevaluating Italy's Aa2 rating.
Source: Moody's

Any way you slice it, Italy's economy is a wreck.

A bona fide disaster.

The meaning of Independence

2011-07-04T04:08:00.000-07:00

IN CONGRESS, JULY 4, 1776

The unanimous Declaration of the thirteen united States of America

When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. — Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

He has refused his Assent to Laws, the most wholesome and necessary for the public good.

He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.

He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their Public Records, for the sole purpose of fatiguing them into compliance with his measures.

He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.

He has refused for a long time, after such dissolutions, to cause others to be elected, whereby the Legislative Powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.

He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.

He has obstructed the Administration of Justice by refusing his Assent to Laws for establishing Judiciary Powers.

He has made Judges dependent on his Will alone for the tenure of their offices, and the amount and payment of their salaries.

He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance.

He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.

He has affected to render the Military independent of and superior to the Civil Power.

He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:

For quartering large bodies of armed troops among us:
For protecting them, by a mock Trial from punishment for any Murders which they should commit on the Inhabitants of these States:

For cutting off our Trade with all parts of the world:

For imposing Taxes on us without our Consent:

For depriving us in many cases, of the benefit of Trial by Jury:

For transporting us beyond Seas to be tried for pretended offences:

For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies

For taking away our Charters, abolishing our most valuable Laws and altering fundamentally the Forms of our Governments:

For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.

He has abdicated Government here, by declaring us out of his Protection and waging War against us.

He has plundered our seas, ravaged our coasts, burnt our towns, and destroyed the lives of our people.

He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation, and tyranny, already begun with circumstances of Cruelty & Perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.

He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.

He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince, whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.
Nor have We been wanting in attentions to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these united Colonies are, and of Right ought to be Free and Independent States, that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. — And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.

Swiss Franc Collapse threat?

2011-06-30T14:36:00.000-07:00

I had some emails and search strings asking me about the Swiss Franc any potential trouble for it in light of the Euro's shakiness. Below is what I found from STRATFOR.com:

Summary

As the Swiss franc strengthens in comparison to the euro, concerns are being raised about the large number of franc-denominated loans, particularly mortgages, in Central Europe. As the franc’s value rises in comparison to Central European currencies, it proportionally increases the debt repayment values of these mortgages, risking massive defaults in these countries, particularly Poland and Hungary. While mortgages are traditionally robust forms of debt and governments, including that of Switzerland, are attempting to mitigate the risk to mortgage owners, a major economic event in the eurozone could cause massive defaults in Swiss franc-denominated mortgages, leading to contagion across the Continent, particularly in Austria.

Analysis

Historically low interest rates on loans in Swiss francs have led consumers in major Central European countries such as Poland, Slovakia, Hungary and the Czech Republic to acquire substantial loans, particularly mortgages, in francs. Currently, 53 percent of outstanding mortgages in Poland and about 60 percent of those in Hungary are denominated in francs.
The franc’s perceived stability amid growing eurozone troubles has strengthened it considerably in comparison to the euro and Central European currencies. This is not only worrisome to the consumers in the countries with significant franc-denominated debt, who now struggle to service their increasing debt load, but also for financial institutions that hold significant assets in Central Europe, such as that of Austria.

While new homeowners in Poland and Hungary have shied away from franc-denominated loans since the franc’s strengthening in the wake of the beginnings of the eurozone sovereign debt crisis in early 2010, the franc has traditionally been considered a stable currency with low associated interest rates and therefore a good alternative to the euro. The majority of Polish and Hungarian mortgage purchasers before 2008 took out their loans in francs at a time when, due to the economic dynamism of the emerging Polish and Hungarian economies, the zloty and forint were relatively strong in relation to the Swiss franc. The franc traded for 160 forints before the crisis; it currently trades for 224, a 40 percent increase. Similarly, the franc traded for 2.1 zlotys in July 2008 before jumping 57 percent to currently trade at 3.3. Moreover, the fluctuation in the zloty or forint value of the Swiss-denominated loan proportionally increases the debt repayment value. The compulsory nature of making a mortgage payment (the failure to pay one’s mortgage will eventually result in losing one’s home) means that debtors are unlikely to default despite the increase in monthly mortgage payment value. However, debtors are also likely to drastically cut all other spending when faced with the risk of default, thus undercutting domestic consumption — a major driver of the Polish economy in particular.

The situation is not necessarily as alarming as some reports from Poland and Hungary claim. Central European governments have begun implementing stabilization measures to reduce the risk to mortgage owners. The Hungarian parliament approved a legislative package June 10 that included fixing the exchange rate on franc-denominated mortgage repayments at 180 forints. Hungary is also considering implementing a program that would buy back a defaulting property and take in its owners as tenants. Poland has thus far taken a passive role on the issue but has declared itself willing to intervene should mortgage defaults become imminent. Moreover, Switzerland itself has an incentive to devalue its currency, mainly to ensure that its large export sector remains competitive. To a certain extent, the Swiss government can mitigate the rise of the franc by purchasing foreign currency, particularly euros, driving down the demand for francs. The problem is that Switzerland has already been undertaking such an effort since the start of the eurozone crisis and yet the franc has still appreciated considerably.

However, a major economic event in the eurozone — such as a Greek default, Spanish banking problems, or the brewing political crises in Italy and Spain — could cause the franc to skyrocket in relation to both the euro and currencies such as the zloty and the forint. Such an increase could be so large that even the Hungarian and Polish governments would be unable to avoid massive domestic defaults on mortgages and Switzerland would be powerless to offset its strengthening currency. Homeowners with mortgages denominated in Swiss francs would find themselves unable to repay the value of the appreciated loan in their domestic currency and would be forced to default or restructure their loans, both of which could impact the banks that originated the loans.

This certainly would not bode well for Europe, especially Austria. The 2008 financial crisis started in Europe when the collapse of Lehman Brothers triggered a massive capital flight away from Central Europe, and a mortgage crisis in Hungary or Poland could potentially replicate these triggers, leading to contagion across the Continent. Austria, particularly susceptible to contagion emanating from Central Europe, could act as the gateway for the crisis into the eurozone. The Austrian financial sector would have to incur these losses, potentially forcing Vienna to bail out its banks, focusing the markets and investors on Austria itself

Panic on the streets of London...

2011-06-30T08:00:00.000-07:00

...and potentially most of Europe...and possibly coming soon to a city near you. As discussions and emotions flare over austerity you can expect the European financial troubles to further push this problem into the Red Zone. That's a two for one phrase as I do mean a danger zone as well as a rise in socialism-leading to some sort of totalitarianism. History is replete with example after example of crisis, leading to chaos, leading to some faction or person saying "I can stabilize it, I can fix it" and this leads to a dictatorship. Sure you have the obvious stuff like the Soviets, Mao, Hitler, but those are just the most well known in the 20th Century...each coming from crisis, to chaos/revolution/ to dictatorship.

Now if this current crisis (Greece, UK, Spain, Ireland, Middle East, etc.) turns to revolutionary chaos and goes world wide what sort of faction or leader arises to calm not just Yemen, or Greece, but maybe the euro zone? or the Middle east? or?? I don't know who or what, but brother I can tell you it will not be good.

Okay enough of that, it's food for thought, do your own research and see for yourself if it plays itself out over and over. In my opinion only the actors change, but the play is always the same. Below is a nifty article regarding the current Eurozone troubles and where they may end. Read, research, and think about it, and then decide for yourself.

SOURCE

There's no getting around it.
Greece is Screwed. So is the World.

Bloomberg reports today that the “Euro Gains on Greece Plan Optimism; Dollar Rises Versus Yen on U.S. Yields.”
In other words, Bloomberg (and the general financial press) is reporting that the financial world is completely wrong, has gone insane, and is otherwise delusional when it comes to the “Greek conundrum.” Whether it’s policy ignorance, political indifference, or willful absence of sound decision making, the business press and world could not be more wrong about where Greece is headed.

And make no mistake: this erroneous thinking WILL drive us into a global-wide Depression.
Here‘s why Greece is inevitably screwed and what its means for the rest of us:

HISTORY: No matter how optimistic the rest of the world, Greece’s survival depends upon Germany’s good-will. Why? Historical wrongs, atrocities, and, you know, a few World Wars. Because the European Union is a product of political optimism but economic ignorance – created with the idea that if the world bound Germany and France together in a single political and economic entity, the economic “pie” would grow while the two nations would be forced to play nice together – people think “Well, Germany’s got this. They’ll rescue Greece before things get too bad.” Sadly for these mis-informed (or, worse, ignorant) optimists, there’s only so much German money to go around. At some point, the German people will stop economically apologizing for WW2 and start letting things “sort themselves out.” Greece will inevitably be that point. And from there, the economic dominos will fall.

POLITCAL, um, OPENESS (aka, SLUTTINESS): Let’s be honest: in the mid-2000’s, the European Union played fast and loose with membership, letting in second- and third-tier economies, like Greece (and, frankly, Ireland and Portugal, not to mention Spain, Romania, and…well, you get the idea). This tacking of the economic fates of the “anchor” nations (i.e. Germany and France) to those of smaller, “evolving” (aka less “productive”) nations, all in the name of “political unity,” has created this mess that no amount of political will can clean up. That is, the European Union only works so long as the “anchor” countries lift up and support the economies of the “smaller” nations. Of course, there are only so many levers the German and (again, to a much lesser extent) French governments can pull to save economies such as Greece, and no amount of European “let’s hug this out” political good-will can change that these countries are economically stretched to the limit.

STREET RIOTS?: The citizens of Germany (and, to a lesser extent, France) are all but threatening mutiny at the idea that they will be the ones economically propping up an (in their opinion unwilling-to-change) Greece. Conversely, while citizens of Greece are protesting at the same time the idea of “economic austerity,” designed to curb the damage) simply in the name of political unity, there may, literally, be riots in the streets of Europe the next few months if the natural economic course of things (i.e. a Greek default) are not allowed to play themselves out. The political tone deafness of the world’s pundits are grossly underplaying this threat to social stability. Look for riots in the German streets, should Greece be kept from defaulting.

FUNDAMENTALS: While Greece is pledging to “change” in order to receive ROUND TWO of European Union bail-out dollars, the country clearly hasn’t learned it’s the lesson to be gleaned from teetering on the brink of financial ruin. The economy as it exists pre-and-post-crisis is fundamentally the same, as is the nation’s spending and taxing habits. A constant drain on the European Union’s coffers, Greece has done little, if anything, to enact and enforce the fundamental financial and economic changes necessary to save the economy from default. Given that the European Union can only pump so many dollars into this financial sink-hole – while Greece seems unable or unwilling to change – default seems the only viable option.

Given these Euro-realities, (and misreads from the world at large), then, the end-game is clear: no matter how much and how often Germany (and the rest of the European Union) throws “emergency financing” at the financial-disaster-that-is-Greece, the Greek economy will (and almost has to) default. When, you ask?

Brace yourselves…

Within the next 12 months, with the Euro strained to it’s financial breaking point, the Greek economy will plunge into the abyss, dragging down not only the European Union but also the broader financial world. This will lead to an economic depression the likes of which we haven’t seen since 1929. Why is that?

When the Euro inevitably collapses in value, investor dollars will split between the USD, Swiss Franc, and Japanese Yen, severely depressing the majority of the other 1st world economies. With these central importers rendered relatively economically helpless, commodities prices will collapse, leaving the world’s 2nd and 3rd tier economies and exporters even further depressed, creating a global financial crisis and chasm that will take nearly a decade to render itself right again.
Furthermore, so goes Greece, goes the European Union; that is, the EU as we know it will cease to exist. Instead, this default will lead to a permanent fracture between the member-states, leaving a core of “financial foundation” countries (France, Germany, and maybe 2-3 others) left to clean up the continental economic mess. It could very well take decades to reverse this seemingly inevitable and nearly-irrevocable economic damage.

While the business press (and general punditry) is desperate to explain away a potential Greek default, we must instead prepare for the inevitable one that IS coming. We can dance around, ignore, or paint pretty financial pictures over the economic realities of the situation, but make no mistake: Greece will default, and with it will go the entire world economy. Instead of hoping it away in a last-minute reading of the economic-tea-leaves, we’d be best to prepare for the inevitable.

And don’t say I didn’t warn you.