The Largest Economy In The World Is Imploding Right In Front Of Our Eyes

A devastating economic depression is rapidly spreading across the largest economy in the world.  Unemployment is skyrocketing, money is being pulled out of the banks at an astounding rate, bad debts are everywhere and economic activity is slowing down month after month.  So who am I talking about?  Not the United States – the economy that I am talking about has a GDP that is more than two trillion dollars larger.  It is not China either – the economy that I am talking about is more than twice the size of China.  You have probably guessed it by now – the largest economy in the world is the EU economy.  Things in Europe continue to get even worse.  Greece and Spain are already experiencing full-blown economic depressions that continue to deepen, and Italy and France are headed down the exact same path that Greece and Spain have gone.  Headlines about violent protests and economic despair dominate European newspapers day after day after day.  European leaders hold summit meeting after summit meeting, but all of the “solutions” that get announced never seem to fix anything.  In fact, the largest economy on the planet continues to implode right in front of our eyes, and the economic shockwave from this implosion is going to be felt to the four corners of the earth.

On Friday, newspapers all over Europe declared that Greece is about to run out of money (again).

The Greek government says that without more aid they will completely run out of cash by the end of November.

Of course the rest of Europe is going to continue to pour money into Greece because they know that if they don’t the financial markets will panic.

But they are also demanding that Greece make even more painful budget cuts.  Previous rounds of budget cuts have been extremely damaging to the Greek economy.

The Greek economy contracted by 4.9 percent during 2010 and by 7.1 percent during 2011.

Overall, the Greek economy has contracted by about 20 percent since 2008.

This is what happens when you live way above your means for too long and a day of reckoning comes.

The adjustment can be immensely painful.

Greece continues to implement wave after wave of austerity measures, and these austerity measures have pushed the country into a very deep depression, but Greece still is not even close to a balanced budget.

Greece is still spending more money than it is bringing in, and Greek politicians are warning what even more budget cuts could mean for their society.

For example, what Greek Prime Minister Antonis Samaras had to say the other day was absolutely chilling….

“Greek democracy stands before what is perhaps its greatest challenge,” Samaras told the German business daily Handelsblatt in an interview published hours before the announcement in Berlin that Angela Merkel will fly to Athens next week for the first time since the outbreak of the crisis.

Resorting to highly unusual language for a man who weighs his words carefully, the 61-year-old politician evoked the rise of the neo-Nazi Golden Dawn party to highlight the threat that Greece faces, explaining that society “is threatened by growing unemployment, as happened to Germany at the end of the Weimar Republic”.

“Citizens know that this government is Greece’s last chance,” said Samaras, who has repeatedly appealed for international lenders at the EU and IMF to relax the onerous conditions of the bailout accords propping up the Greek economy.

But don’t look down on Greece.  They are just ahead of the curve.  Eventually the U.S. and the rest of Europe will go down the exact same path.

Just look at Spain.  When Greece first started imploding, Spain insisted that the same thing would never happen to them.

But it did.

By itself, Spain is the 12th largest economy in the world, and right now it is a complete and total mess with no hope of recovery in sight.

The national government is broke, the regional governments are broke, the banking system is insolvent and Spain is in the midst of the worst housing crash that it has ever seen.

On top of everything else, the unemployment rate in Spain is now over 25 percent and the unemployment rate for those under the age of 25 is now well above 50 percent.

An astounding 9.86 percent of all loans that Spanish banks are holding are considered to be bad loans which will probably never be collected.  Before it is all said and done, probably ever major Spanish bank will need to be bailed out at least once.

Manufacturing activity in Spain has contracted for 17 months in a row, and the number of corporate bankruptcies in Spain is rising at a stunning rate.

Five different Spanish regions have formally requested bailouts from the national government, and the national government is drowning in an ocean of red ink.

Meanwhile, panic has set in and there has been a run on the banks in Spain.  The following is from a recent Bloomberg article….

Banco Santander SA (SAN), Spain’s largest bank, lost 6.3 percent of its domestic deposits in July, according to data published by the nation’s banking association. Savings at Banco Popular Espanol SA, the sixth-biggest, fell 9.5 percent the same month.

Eurobank Ergasias SA, Greece’s second-largest lender, lost 22 percent of its customer deposits in the 12 months ended March 31, according to the latest data available from the firm. Alpha Bank SA (ALPHA), the country’s third-biggest, lost 26 percent of client savings during that period.

Overall, the equivalent of 7 percent of GDP was withdrawn from the Spanish banking system in the month of July alone.

Thousands of Spaniards have become so desperate that they have resorted to digging around in supermarket trash bins for food.  In response, locks are being put on supermarket trash bins in some areas.

But Greece and Spain are not alone in seeing their economies implode.

As I wrote about recently, the number of unemployed workers in Italy has risen by more than 37 percent over the past year.

The French economy is starting to implode as well.  Just check out this article.

The unemployment rate in France is now above 10 percent, and it has risen for 16 months in a row.

It is just a matter of time before things in Italy and France get as bad as they already are in Greece and Spain.

The chief economist at the IMF is now saying that it will take until at least 2018 for the global economy to recover, but unfortunately I believe that he is being overly optimistic.

As I have said so many times before, the next wave of the global economic crisis is rapidly approaching.  Depression is already sweeping much of southern Europe, and it is only a matter of time before it sweeps across northern Europe and North America as well.

Neither Obama or Romney is going to be able to stop what is coming.  The global economy is getting weaker with each passing day.  The central banks of the world can print money until the cows come home, but that isn’t going to fix our fundamental problems.

The largest economy in the world is imploding right in front of our eyes and nobody seems to know what to do about it.

If you believe that Barack Obama, Mitt Romney or Ben Bernanke can somehow magically shield us from the economic shockwave that is coming then you are being delusional.

Just because what is going on in Europe is a “slow-motion train wreck” does not mean that it will be any less devastating.

Yes, we can see what is coming and we can understand why it is happening, but that doesn’t mean that we will be able to avoid the consequences.

Uh Oh: 90 Percent Of Americans Rate Economic Conditions In The U.S. As “Poor”

Uh oh – are we rapidly reaching another major economic tipping point?  According to a new CNN/ORC International Poll, 90 percent of the American people believe that economic conditions in the United States are “poor”.  This represents a significant increase from when the same question was asked in June.  Back then, 81 percent of the American people considered economic conditions to be “poor”.  To put this in perspective, only 11 percent of Americans rated economic conditions in the U.S. as “poor” back in January of 1999.  The Federal Reserve and the Obama administration keep telling us that we are in the middle of an “economic recovery”, but obviously what average Americans are experiencing on the street is a different story.  Millions of families have been absolutely devastated by mass layoffs, heartless foreclosures or bad debts.  All of the recent polls show that satisfaction with government is at an all-time low and anger at Wall Street and the financial community is rising to dangerous levels.  In the United States today, the economy is the most important issue for most Americans.  When you have 9 out of 10 Americans rating economic conditions as “poor”, that is a very troubling sign.

Many wealthy Americans consider it to be very painful when their investment portfolios go down by a few percentage points, but that is not the kind of economic pain that we are talking about.

The truth is that the vast majority of Americans in the bottom half of society do not even have investment portfolios.

What we are talking about is real economic pain.

As I have written about previously, the average American family is barely making it right now.  Tonight, a whole lot of American families will gather around their kitchen tables and will have some very nervous conversations about things such as making the next mortgage payment or how to pay the heating bill this upcoming winter.

Have you ever been at a point where you work as hard as you can and yet it is still not good enough to provide for your family?

If you have never been completely broke and at the end of your rope financially, then you should not judge the people who are going through it right now.

There are very real reasons why so many Americans are so incredibly depressed about the economy at the moment.

One recent poll found that 80 percent of the American people believe that we are actually in a recession right now.

Things have gotten so bad that Hallmark recently unveiled a 6 card line of “job loss” greeting cards.

Yes, that really is true.

Every month, tens of thousands of American families are still losing their homes to foreclosure, and we are on pace for record low new home sales once again in 2011.

Many families have gotten in debt up to their eyeballs in an effort to stay afloat.  According to a new study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent.

In case you are wondering, that is not good.

Our founders intended for us to live in a capitalist system that allows all Americans to have an opportunity to better themselves, but instead what we have developed is a system where the vast majority of the money and the vast majority of the economic power are in the hands of the biggest banks and the biggest corporations.

If you work for the system and you are near the top of the pyramid, life is good.

For nearly everyone else, life is a struggle.

Back in 1980, the top 1% of all income earners in America brought in about 10% of all income.  Today, the top 1% of all income earners bring in about 20% of all income.

If the ranks of the top income earners were populated by a huge number of entrepreneurs and small business owners, it wouldn’t be such a bad thing.

But instead, the reality is that most of the very wealthy either work in the financial community or they work for the biggest corporations.

True capitalism is supposed to create a very healthy environment for small businesses.

Instead, our current system suffocates them out of existence.

According to the Bureau of Labor Statistics, 16.6 million Americans were self-employed back in December 2006.  Today, that number has shrunk to 14.5 million.

Our entire system is now tremendously slanted in favor of “the big guy” and against “the little guy”.

Millions of Americans are starting to get sick and tired of all of the economic injustice and the vast corruption that is endemic in our financial system.

As the economy has continued to decline, the anger and the frustration of average of Americans has reached a boiling point.

This is a big reason why we have seen the rise of new political movements in recent years.

First, we saw the Tea Party arise to challenge the establishment in the Republican Party.  But sadly there are already signs that the establishment has taken over the Tea Party to a large extent.

Now, we are seeing the rise of the Occupy Wall Street movement.  Large numbers of frustrated Americans are flocking to these protests because they want an outlet for expressing the anger and frustration that they are feeling.  Unfortunately, there is quite a bit of evidence that the Occupy Wall Street movement was started and is being greatly aided by the liberal political establishment in this country.

What the American people need to do is to wake up and break out of the stale two party system.

Unfortunately, the American people have become so “dumbed down” that large chunks of them are absolutely clueless about what is really going on in this country.

For example, according to the new CNN/ORC International Poll mentioned above, 27 percent of Americans have never heard of Federal Reserve Chairman Ben Bernanke and 15 percent of Americans have no opinion about him at all.

Do you understand what that means?

It means that only 58 percent of Americans know enough about Federal Reserve Chairman Ben Bernanke to have an opinion about him.

According to the survey, the way that the 58 percent breaks down is that 28 percent of Americans have a favorable view of Bernanke and 30 percent of Americans have an unfavorable view of him.

That is so sad.

Ben Bernanke has more power over our economic problems than anyone else in the country, and yet only 30 percent of Americans have an unfavorable view of him.

Nearly as many Americans say that they have never heard of him as say that they do not view him favorably.

How pathetic is that?

That is one of the reasons why I write about the Federal Reserve so much.

We need to get the American people educated.

If the American people get educated, they will feel empowered.

Where there is a lack of knowledge, the people perish.

The other day, a 51-year-old father of three daughters up in Minnesota that had just lost his job locked himself in his car and shot himself in the head in front of some of his former co-workers.

I don’t want to see anymore of that.

We need to give the American people some hope.  We need to explain to them exactly why this economic crisis is happening and what can be done to turn things around.

We also need to reach out to people that are in pain and love them and let them know that there is always hope.

All of us know people out there that are really hurting right now.  Please don’t forget about them.  Please don’t let them quietly slip into depression.  Please don’t let them become the next victims of this economy.

There is always hope.  A reader of this column named “JD” went through all kinds of hell in recent years.  He lost his job, he lost his lady, he stayed in run down motels, he got meals wherever he could and he even slept in his car for a time.  But today he has a new job and his outlook on life is brighter than it has been in ages.

In 1941, Winston Churchill gave a speech during which he uttered the following words: “never give in, never give in, never, never, never, never-in nothing, great or small, large or petty – never give in except to convictions of honour and good sense. Never yield to force; never yield to the apparently overwhelming might of the enemy.”

Things may not look good for you right now, but you must never give in.

No matter how bad things are, they can always be turned around.

Yes, the U.S. economy is going to continue to decline if we stay on our current path, but none of us must ever use that as an excuse to give up.

There is always hope.  You just have to keep on fighting.

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