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 What we are all watching unfold right now is a complete and total financial nightmare for Italy. Italian bond yields are soaring to incredibly dangerous levels, and now the yield curve for Italian bonds is turning upside down. So what does that mean? Normally, government debt securities that have a longer maturity pay a higher interest rate. There is typically more risk when you hold a bond for an extended period of time, so investors normally demand a higher return for holding debt over longer time periods. But when investors feel as though a major economic downturn or a substantial financial crisis is coming, the yield on short-term bonds will often rise above the yield for long-term bonds. This happened to Greece, to Ireland and to Portugal and all three of them ended up needing bailouts. Now it is happening to Italy and Spain may follow shortly, but the EU cannot afford to bail out either of them. An inverted yield curve is a major red flag. Unfortunately, there does not seem to be much hope that there is going to be a solution to this European debt crisis any time soon. (Read More....)
 The debt crisis in Europe just seems to get worse with each passing day, and it is yet another glaring example of why the EU is a mind blowing failure. The EU is made up of 27 nations that all have their own economic policies, and 17 of those nations are trying to use the euro as a common currency. But when you have 27 different governments pulling in different directions, it is inevitable that there are going to be major problems. The stunt that Greek Prime Minister George Papandreou just pulled is a perfect example of the nightmare that the EU has become. European officials worked really hard to pull together a deal to address the debt crisis (of course the deal was a total mess, but that is another matter), and a couple of days later Papandreou decides that Greece should hold a national referendum on it. It is so bizarre that it almost defies words. But that is what happens in the EU. Someone else always wants to have a say. Someone else always wants to throw a fly into the ointment. Someone else always want to throw in their two cents. The EU is a bureaucratic nightmare and this latest episode is yet another example of that fact. First the politicians in Europe come up with an idiotic plan that is going to make the financial crisis much worse, then Papandreou comes forward and pulls a stunt that shatters what little confidence the financial markets still had in Greece. That is why the EU should break up. It is a total failure and it is time that we all admitted it. (Read More....)
 Do you hear that sound? It is the sound of Europe being hit with a cold dose of financial reality. The air has been let out of the balloon, and investors all over the world are realizing that absolutely nothing has been solved in Europe. The solutions being proposed by the politicians in Europe are just going to make things worse. You don't solve a sovereign debt crisis by shredding confidence in sovereign debt. But that is exactly what the "voluntary 50% haircut" has done. You don't solve a sovereign debt crisis by pumping up your "bailout fund" with borrowed money from China, Russia and Brazil. More debt is just going to make things even worse down the road. You don't solve a sovereign debt crisis by causing a massive credit crunch. By giving European banks only until June 2012 to dramatically improve their credit ratios, it is going to force many of them to seriously cut back on lending. A massive credit crunch would significantly slow down economic activity in Europe and that is about the last thing that the Europeans need right now. If the deal that was reached last week was the "best shot" that Europe has got, then we are all in for a world of hurt. (Read More....)
 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? (Read More....)
 We are getting so close to a financial collapse in Europe that you can almost hear the debt bubbles popping. All across the western world, governments and major banks are rapidly becoming insolvent. So far, the powers that be are keeping all of the balls in the air by throwing around lots of bailout money. But now the political will for more bailouts is drying up and the number of troubled entities seems to grow by the day. Right now the western world is facing a debt crisis that is absolutely unprecedented in world history. Europe has had a tremendously difficult time just trying to keep Greece afloat, and several much larger European countries are now on the verge of a major financial crisis. In addition, there is a growing number of very large financial institutions all over the western world that are also rapidly approaching a day of reckoning. The global financial system is a sea or red ink, and when we get to the point where there are hundreds of ships going under how is it going to be possible to bail all of them out? The quotes that you are about to read show that quite a few top financial and political insiders know that things cannot hold together much longer and that a horrific economic crisis is coming. We built the global financial system on a foundation of debt, leverage and risk and now this house of cards that we have created is about to come tumbling down. (Read More....)
 Will global financial markets reach a breaking point during the month of October? Right now there are all kinds of signs that the financial world is about to experience a nervous breakdown. Massive amounts of investor money is being pulled out of the stock market and mammoth bets are being made against the S&P 500 in October. The European debt crisis continues to grow even worse and weird financial moves are being made all over the globe. Does all of this unusual activity indicate that something big is about to happen? Let's hope not. But historically, the biggest stock market crashes have tended to happen in the fall. So are we on the verge of a "Black October"? (Read More....)
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This Is Yet Another Glaring Example Of Why The EU Is A Mind Blowing Failure