20 Quotes From European Leaders That Prove That They Know That The Financial System In Europe Is Doomed

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.

Is The End Of The Euro In Sight?

The future of the euro is hanging by a thread at the moment.  The massive debt problems of nations such as Greece, Italy and Portugal are dragging down the rest of the Europe, and the political will in northern Europe to continue to bail out these debt-ridden countries is rapidly failing.  Could the end of the euro actually be in sight?  The euro was really a very interesting experiment.  Never before had we seen a situation where monetary union was tried without political and fiscal union along with it on such a large scale.  The euro worked fairly well for a while as long as everyone was paying their debts.  But now Greece has collapsed financially, and several other countries in the eurozone (including Italy) are on the way.  Right now the only thing holding back a complete financial disaster in Europe are the massive bailouts that the wealthier nations such as Germany have been financing.  But now a wave of anti-bailout sentiment is sweeping Germany and the future of any European bailouts is in doubt.  So what does that mean for the euro?  It appears that there are two choices.  Either we will see much deeper fiscal and political integration in Europe (which does not seem likely at this point), or we will see the end of the euro.

That status quo cannot last much longer.  The citizens of wealthy nations such as Germany are becoming very resentful that gigantic piles of their money are being poured into financial black holes such as Greece.  In fact, it is rapidly getting to the point where we could actually see rioting in the streets of German cities over all of this.

All of this instability is creating a tremendous amount of fear in world financial markets.  Nobody is sure if Greece is going to default or not.

Without more bailout money, Greece will most certainly default.  If anyone does not think that one domino cannot set off a massive chain reaction, just remember what happened back in 2008.

Bear Stearns and Lehman Brothers set off a chain reaction that was felt in every corner of the globe.  All of a sudden credit markets froze up because nobody was sure who had significant exposure to bad mortgages.

Today, the entire world financial system runs on debt, so when there is a credit crunch it can have absolutely devastating economic consequences.  The financial crisis of 2008 helped plunge the world into the greatest recession that the globe had seen since the 1930s.

In the old days, nations such as Greece that got into too much debt would just fire up the printing presses and cover over their problems with devalued currency.

Well, those nations that are using the euro simply cannot do that.  The government of Greece cannot simply zap a whole bunch of euros into existence in order to solve their problems.

Right now, major European banks are holding massive amounts of debt from various European governments on their balance sheets.  Most of these European banks are also very highly leveraged.  Even a moderate drop in the value of those debt holdings could wipe out a number of these banks.

The head of the IMF, Christine Lagarde, recently told Der Spiegel the following….

“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”

Unfortunately, what Lagarde said was right.  You see, the financial system in Europe is a “confidence game” and a “crisis of confidence” is all that it would take to bring it down because it does not have a solid foundation.

Just like the U.S. financial system, the financial system in Europe is a mountain of debt, leverage and risk.  If the winds start blowing the wrong direction, the entire thing could very easily come tumbling down.

Over the past couple of weeks, the outlook in Europe has become decidedly negative.  For example, one senior IMF economist is now actually projecting that Greece will experience a “hard default” at some point in the coming months….

I expect a hard default definitely before March, maybe this year

If Greece defaults, that would mean that the bailouts have failed.  That would also mean that several other nations in Europe would be in danger of defaulting soon as well.

The consequences of a wave of defaults in Europe would be absolutely staggering.  As mentioned above, major banks in Europe are deeply exposed to sovereign debt.

Regarding this issue, Deutsche Bank Chief Executive Josef Ackermann recently made the following stunning admission….

“It’s stating the obvious that many European banks would not survive having to revalue sovereign debt held on the banking book at market levels.”

Yes, you read that correctly.

There are quite a few major European banks that are in imminent danger of collapse.

Even though there hasn’t been any sovereign defaults yet, we are already starting to see massive financial devastation in Europe.  Just check out some of the financial carnage from Monday….

*The stock market in Germany was down more than 5%.

*The stock markets in France and Italy were down more than 4%.

*Royal Bank of Scotland was down more than 12%.

*Deutsche Bank was down more than 6%.

*Societe Generale was down more than 8%.

*Italy’s UniCredit was down more than 7%.

*Barclays was down more than 6%

*Credit Suisse was down more than 4%.

*The yield on 2 year Greek bonds was up to 50.38%.

*The yield on 1 year Greek bonds was up to 82.14%.  A year ago it was under 10%.

Just like in 2008, banking stocks are leading the decline.  We have another major financial crisis on our hands and there is no solution in sight.

As the financial world becomes increasingly unstable, investors are flocking to gold.  In case you have not noticed, gold is up over $1900 an ounce again.

So what comes next?

Well, on Wednesday Germany’s constitutional court is scheduled to announce its verdict on the legality of the latest bailout package for Greece.  The court is expected to rule that the bailout package is legal, but if they don’t that would be really bad news for the euro.

However, whatever the court rules, the reality is that the turbulent political atmosphere inside Germany is probably a much bigger issue as far as the future of the euro is concerned.

Right now, Germans are overwhelmingly opposed to more bailouts.  German Chancellor Angela Merkel’s political party just suffered a resounding defeat in local elections in Germany, and many within her own coalition are withdrawing support for any more bailouts.

This is going to make it very difficult to save the euro.  At this point, Germans have very little faith in the currency.

Just check out what Bob Chapman of the International Forecaster recently wrote about the current atmosphere in Germany….

76% of Germans say they have little or no faith in the euro, up from 71% two months ago. This is what we have been stating for ten years. Long-term 69% to 71% have never wanted the euro. The poll is not at all surprising. The Germany people are saying we have put up with the euro and euro zone for long enough – we want out now.

Germans are also very much against even deeper European economic integration.  For example, recent polling found that German voters are against the introduction of “Eurobonds” by about a 5 to 1 margin.

But Germans are not the only ones that are tired of the euro.  The countries of southern Europe have come to view the euro as a “straightjacket” that keeps them from having the financial flexibility that they need to deal with their debts.

Many people living in southern Europe consider the euro to be a financial instrument that allows nations such as Germany to have way too much power over them.  Just check out what Professor Giacomo Vaciago of Milan’s Catholic University recently had to say….

“It’s clear that the euro has virtually failed over the last ten years, even if you are not supposed to say that. We pretended to be Germans, but it was an illusion”

But if the bailouts fall apart and the euro collapses, we are going to see nations such as Greece fall into total financial collapse.

Just how desperate have things become in Greece?  Just consider the following excerpt from a recent article by Puru Saxena….

In Greece, government debt now represents almost 160% of GDP and the average yield on Greek debt is around 15%. Thus, if Greece’s debt is rolled over without restructuring, its interest costs alone will amount to approximately 24% of GDP. In other words, if debt pardoning does not occur, nearly a quarter of Greece’s economic output will be gobbled up by interest repayments!

Without help, there is no way that Greece is going to be able to avoid a default.

Sadly, Greece is far from the only major financial problem in Europe.  Portugal, Ireland and Italy also have debt to GDP ratios that are well above 100%.

As mentioned earlier, this is a massive problem for the financial system of Europe, because nearly all of the major European banks are leveraged to the hilt and they are massively exposed to government debt.

If you don’t think that this is a problem, just remember what happened back in 2008.

Back then, Lehman Brothers was leveraged 31 to 1.  When things turned bad, Lehman was wiped out very rapidly.

Today, major German banks are leveraged 32 to 1, and those banks are currently holding a massive amount of European sovereign debt.

Overall, the entire global banking system has a total of 2 trillion dollars of exposure to Greek, Irish, Portuguese, Spanish and Italian debt.

If European countries start defaulting, the dominoes are going to start falling and things will get really messy really quickly.

There are two things that could keep defaults from happening.

Number one, Germany and the other wealthy nations in the eurozone could just suck it up and decide to pour endless bailouts into nations such as Greece and Italy.

Number two, the nations of the eurozone could opt for much deeper economic and political integration.  That would mean a massive loss of sovereignty, but it would save the euro, at least for a little while.

Right now, the political will for either of those two choices is simply not there.  That does not mean that the political elite of Europe will not try to ram through some sort of a plan, but the reality is that Germans are already so upset about what has been going on that they are about ready to riot in the streets.

Yes, the end of the euro is a real possibility.

If the euro does collapse, it would likely cause a financial panic that would make 2008 look like a Sunday picnic.

So what do all of you think about the future of the euro?  Please feel free to leave a comment with your thoughts below….

 

A Dollar Collapse? No Way – The U.S. Dollar Rocks! (Propaganda)

Are we on the verge of a dollar collapse?  Don’t believe the skeptics.  The truth is that there is no currency in the world that is stronger than the old greenback.  The U.S. dollar is the reserve currency of the world.  Virtually all of the nations on the face of the earth use it for trading and they always will.  Why?  Because the U.S. dollar is awesome.  No currency on earth can compete with our awesomeness.  So what that the dollar hit a new all-time record low against the Swiss franc today?  Do you really want to move over with the Swissies and eat chocolate and make watches?  No, you want to live in the land of American Idol, the NFL and apple pie – the good old USA.  Who cares if it takes about a dollar and a half to buy a single euro now?  Do you really want to go live with the Frenchies and eat a bunch of French bread while you wear a beret every day?  Of course not.  There isn’t going to be a dollar collapse.  As long as the USA is still number one the rest of the world is still going to need U.S. dollars.  So quit your worrying.

The other day all of the “doom and gloomers” were crying that the sky was falling because the U.S. dollar had fallen for 8 trading days in a row.  They were proclaiming that the “end of the dollar” was near because the dollar index was approaching a new record low.

The following is how an article from yesterday in the Washington Post described the recent slide of the dollar….

The dollar has fallen against a basket of six major currencies — the euro, Japanese yen, British pound, Canadian dollar, Swiss franc and Swedish krona — for the past eight trading days. That measure struck its lowest point since July 2008 on Monday, at 72.72. It hit bottom in April 2008 at 71.33. Its highest point since the euro’s creation was 120.92 in July 2001.

Well guess what?

The dollar index moved back up today.

That is what happens – currencies go up and currencies go down.

There is no need to get your pants in a twist over it.

When the U.S. dollar goes down, it makes our products more affordable overseas.  When other nations buy more of our stuff that helps our businesses.

So when the dollar declines a little bit that is nothing to be alarmed about.

So far in 2011, the U.S. dollar has only lost about 6.5 percent of its value.

Should we be freaking out about a measly 6.5 percent?

I don’t think so.

Do you want an even “scarier” number?

The dollar has fallen by 17 percent compared to other major national currencies since 2009.

Oooooooooohhhhhhhhhhhh – are you frightened out of your mind yet?

You better run outside Chicken Little – the sky might be falling.

The problem is that there are so many tinfoil hat wearing conspiracy theorists running around declaring that the U.S. dollar is dying that some people are actually starting to believe it.

Do you want proof that the U.S. dollar is going to be just fine?

Here you go….

Just check out what U.S. Treasury Secretary Timothy Geithner recently told the Council on Foreign Relations….

“Our policy has been and will always be, as long as I will be in office, that a strong dollar is in the interest of the country.”

Bam!

You have the very words of the U.S. Treasury Secretary right there.

He has promised the we “will always” have a strong dollar policy.

Geithner has said it and that settles it.

Any questions?

Who are you going to believe?  Are you going to believe the U.S. Treasury Secretary or are you going to believe a bunch of crazy Internet bloggers with blogs with titles such as “Economic Disaster” and “The American Dream Has Been Flushed Down The Toilet”?

Let’s get real.

The U.S. dollar is just fine and there is not going to be some mythical “dollar collapse”.

But isn’t the price of gasoline going up?

Sure it is.

But that isn’t the fault of the Federal Reserve.  They don’t set prices for gasoline.

The reality is that prices for different things go up and down.  That is what a free market economy looks like.

Right now the price of gasoline is actually lower than it was back in 2008….

So shouldn’t we actually be talking about falling gasoline prices?

I don’t know about you, but I sure am glad to be paying less for gasoline than I was back in mid-2008.

But the tinfoil hat crowd will “cherry pick” statistics to make it seem like things are worse than they really are.  They will break out scary sounding statistics such as the fact that over the past 12 months the average price of gasoline in the United States has gone up by about 30%.

LOL – cry me a river.  Life is tough.  People will cry over just about anything these days.

Who really cares that the average American driver will spend somewhere around $750 more for gasoline in 2011?

That is just a sign that the economic recovery is in full swing.

Do you know how much all of that money is going to help our oil companies?

They are going to be swimming in cash, and all of that wealth will “trickle down” and help out the folks on main street.

You would think that the half-crazed economic bloggers out there would be thrilled by all of this, but no – they just keep trotting out the “inflation boogeyman” over and over and over.

Well, you know what?

According to no less of an authority than Federal Reserve Chairman Ben Bernanke, we basically have close to zero inflation in the United State right now.

You believe the Federal Reserve, don’t you?

If not, there is probably something wrong with you.

Unfortunately, we have got a whole bunch of these self-proclaimed “experts” (who are really just legends in their own minds) running around proclaiming that inflation is not calculated the same way that it used to be.

Well, you know what?  They are right.  But it isn’t some great conspiracy.  The truth is that we have “improved” the way that inflation is calculated 24 times since 1978.

The government is always trying to become more accurate.

What is wrong with that?

But today we have a bunch of amateurs running around trying to tell us what the “real” rate of inflation actually is.

For example, a New York post analysis claims that the rate of inflation in New York City has been about 14 percent over the past year.

So how many prices did they measure?

A dozen?

Two dozen?

Who are you going to trust more – the Federal Reserve or the New York Post?

Perhaps the New York Post should just stick to reporting on the latest Elvis sighting and leave economics to the big boys.

If hack reporting by publications like the New York Post wasn’t bad enough, we’ve also got numbskulls like John Williams from a website called “Shadow Government Statistics” running around proclaiming that the sky is going to fall because of U.S. government debt.

The following is a sampling of the smelly stuff that Williams is spreading around….

S&P is noting the U.S. government’s long-range fiscal problems. Generally, you’ll find that the accounting for unfunded liabilities for Social Security, Medicare and other programs on a net-present-value (NPV) basis indicates total federal debt and obligations of about $75 trillion. That’s 15 times the gross domestic product (GDP). The debt and obligations are increasing at a pace of about $5 trillion a year, which is neither sustainable nor containable. If the U.S. was a corporation on a parallel basis, it would be headed into bankruptcy rather quickly.

Does anyone actually believe any of that nonsense?

How long has Williams been predicting that U.S. government finances are going to collapse?

Yes, he has been doing it for a very, very long time.

Has the sky fallen yet?

Are we living in an economic wasteland?

Has there been a U.S. dollar collapse?

No.

Look around you – everything is just fine.

Every time the U.S. economy has had a recession in the past, what has happened?

The economy has recovered and has gotten larger than ever.

And that is exactly what is happening again.

But sadly, there are more Americans than ever that actually believe that we are headed for economic disaster.  In fact, there are some websites where they actually debate what the best place to live in the United States will be when the “economic collapse” happens.

Can you believe that?

People need to grow up.

Yes, the U.S. government is in debt.  That should be no surprise.  U.S. government debt is normal.  The truth is that our financial system is designed to have U.S. government debt constantly expand and for there to always be a little bit of inflation in the system.

When the U.S. government goes into more debt, more money is created.  If there was no debt in our society there would be no money.

So all of these bozos that claim that they want to get rid of all government debt don’t know what they are talking about.

We need to trust that the experts over at the Federal Reserve know what they are doing.  The prudent moves by Ben Bernanke have helped the economy to recover after the horrible financial crisis of 2008.  Instead of being criticized, he should be commended.  There is a reason why he was named “Person of the Year” by Time Magazine in 2009.

The Federal Reserve is watching inflation.  If it starts spiking up a little bit they will stomp it out.  They know what they are doing.

This is 2011 – the people running things were produced by some of the greatest academic institutions on the planet.  Nothing is going to catch them by surprise.  They know exactly what our problems are and how to solve them.

So quit listening to the tinfoil hat crowd.  Yes, the U.S. dollar will fluctuate a little bit relative to other major currencies.  That is nothing to be alarmed about.

There is not going to be a dollar collapse so stop waiting for one.  The U.S. dollar is always going to be the greatest currency on earth.  Why?  Because the United States is the greatest nation on earth.

After all, what other nation on earth could produce Justin Bieber, Jim Carrey, Simon Cowell, Pamela Anderson, Catherine Middleton, Michael J. Fox, Seth Rogen, Brendan Fraser, Jason Priestly, Tom Green, Ryan Reynolds, Mike Myers, Kiefer Sutherland, Howie Mandel, Keanu Reeves and William Shatner?

——————–

Hopefully by now you have figured out that this is a satirical piece demonstrating how ridiculous much of the propaganda in the mainstream media really is.  Thank you for taking the time to read my twisted attempt at humor.

Shocking New IMF Report: The U.S. Dollar Needs To Be Replaced As The World Reserve Currency And SDRs “Could Constitute An Embryo Of Global Currency”

The IMF is trying to move the world away from the U.S. dollar and towards a global currency once again.  In a new report entitled “Enhancing International Monetary Stability—A Role for the SDR“, the IMF details the “problems” with having the U.S. dollar as the reserve currency of the globe and the IMF discusses the potential for a larger role for SDRs (Special Drawing Rights).  But the IMF certainly does not view SDRs as the “final solution” to global currency problems.  Rather, the IMF considers SDRs to be a transitional phase between what we have now and a new world currency.  In this newly published report, the IMF makes this point very clearly: “In the even longer run, if there were political willingness to do so, these securities could constitute an embryo of global currency.”  Yes, you read that correctly.  The SDR is supposed to be “an embryo” from which a global currency will one day develop.  So what about the U.S. dollar and other national currencies?  Well, they would just end up fading away.

CNN clearly understands what the IMF is trying to accomplish with this new report.  The following is how CNN’s recent story about the new IMF report begins….

“The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world’s reserve currency.”

That is exactly what the IMF intends to do.

They intend to have SDRs replace the U.S. dollar as the world reserve currency.

So exactly what are SDRs?

Well, “SDR” is short for Special Drawing Rights.  It is a synthetic currency unit that is made up of a basket of currencies.  SDRs have actually been around for many years, but now they are being heavily promoted as an alternative to the dollar.

The following is how Wikipedia defines SDRs….

Special Drawing Rights (SDRs) are international foreign exchange reserve assets. Allocated to nations by the International Monetary Fund (IMF), a SDR represents a claim to foreign currencies for which it may be exchanged in times of need.

The SDR is a hybrid.  SDRs are part U.S. dollar, part euro, part yen and part British pound.  In particular, the following is how each SDR currently breaks down….

U.S. Dollar: 41.9%

Euro: 37.4%

Yen: 9.4%

British Pound: 11.3%

Now there are calls for other national currencies to be included in the basket.

Russian President Dmitry Medvedev has publicly called for the national currencies of Brazil, Russia, India and China to be included in the SDR.

In January, the Obama administration said that it fully supports the eventual inclusion of the yuan in the SDR.

So yes, it looks like we are definitely moving in the direction of the SDR becoming a true global currency.

But is this a good idea?

Globalist organizations such as the IMF say that having a true global currency would facilitate world trade, it would make currency wars less likely, it would stabilize the global economy and it would make the rest of the globe less reliant on what is going on in the United States.

In fact, there is a lot of discussion in international financial circles that oil should be traded in SDRs rather than in U.S. dollars.

In a recent interview, IMF Deputy Managing Director Naoyuki Shinohara even suggested that the IMF may actually consider issuing bonds that are denominated in SDRs.  Apparently the goal would be to promote the use of the new “currency”.

But once again, it is important to remember that the IMF does not see SDRs lasting forever either.  Rather, the IMF considers the SDR to be an “embryo” from which a true global currency could emerge.

An IMF paper entitled “Reserve Accumulation and International Monetary Stability” that was published last year even proposed that a future global currency be called the “Bancor” and that a future global central bank could be put in charge of issuing it….

“A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing.”

In fact, at one point the IMF report from last year specifically compares the proposed global central bank to the Federal Reserve….

“The global central bank could serve as a lender of last resort, providing needed systemic liquidity in the event of adverse shocks and more automatically than at present. Such liquidity was provided in the most recent crisis mainly by the U.S. Federal Reserve, which however may not always provide such liquidity.”

Yes, unfortunately this is what the IMF really has in mind for all of us.  A one-world economic system with a one-world currency and a one-world central bank.

Is that what we really need?

A “global Federal Reserve” that dominates the currency and the economy of the entire planet?

At least with the U.S. Federal Reserve there is hope that someday the American people can convince Congress to shut it down.

A “global Federal Reserve” would not answer to anyone.  Individual nations could attempt to pull out, but then they would potentially be isolated from the rest of the globe and potentially cut off from world trade.

That may sound very far-fetched now, but that is the direction we are headed.

And shifting away from the U.S. dollar as the reserve currency of the world would be disastrous for the U.S. economy.

Right now the fact that the U.S. dollar is the primary reserve currency of the world is one of the only things holding it up.  If you took that support away the U.S. dollar could end up collapsing quite quickly.

Let us hope that the American people wake up and start insisting that we want no part in a global currency.  If we ever allow a world currency to start replacing the U.S. dollar to a large extent, we will lose a great deal of our economic sovereignty.  Not that we haven’t lost most of it already, but at least if we are still using our own national currency there is a greater chance that we can reclaim it.

What the IMF is proposing right now may seem very innocent, but the long-term consequences of going down the road they want to put us on could potentially be absolutely catastrophic.

The American people need to send a very clear message to their representatives in Washington D.C…..

#1 We do not want a one-world economy.

#2 We do not want a one-world currency.

#3 We do not want a one-world central bank.

Has The Financial Collapse Of Europe Now Become Inevitable?

What in the world is happening over in Europe?  Well, it is actually quite simple.  We are witnessing the slow motion collapse of the euro and of the European financial system.  At this point, many analysts are convinced that a full-blown financial implosion in Europe has become inevitable.  Ireland, Spain, Portugal, Italy, France and Belgium are all drowning in an ocean of unsustainable debt.  Meanwhile, Germany and the few other “healthy” members of the EU continue to try to keep all of the balls in the air by bailing everyone out.  But can Germany keep bailing the rest of the EU out indefinitely?  Are the German people going to continue to be willing to hand out gigantic sacks of cash to fix the problems of other EU nations?  The Irish were just bailed out, but their problems are far from over.  There are rumors that Greece will soon need another bailout.  Spain, Portugal, Italy and France have all entered crisis territory.  At the same time, there are a whole host of nations in eastern Europe that are also on the verge of financial collapse.  So is there any hope that a major sovereign debt crisis can be averted at this point?

One would like to think that there is always hope, but each month things just seem to keep getting worse.  Confidence in European government debt continues to plummet.  The yield on 10-year Irish bonds is up to 8.97%.  The yield on 10-year Greek bonds is up to an astounding 12.01%.  The cost of insuring French debt hit a new record high on December 20th.

Bond ratings all over Europe are being slashed or are being threatened with being slashed.  For example, Moody’s Investors Service recently cut Ireland’s bond rating by five levels.  Now there is talk that Spain, Belgium and even France could soon all have their debt significantly downgraded as well.

But if the borrowing costs for these troubled nations keep going up, that is just going to add to their financial problems and swell their budget deficits.  In turn, larger budget deficits will cause investors to lose even more confidence.

So how far are we away from a major crisis point?

Professor Willem Buiter, the chief economist at Citibank, is warning that quite a few EU nations could financially collapse in the next few months if they are not quickly bailed out….

“The market is not going to wait until March for the EU authorities to get their act together. We could have several sovereign states and banks going under. They are being far too casual.”

Many analysts are even calling for some of these troubled nations to stop using the euro for a while so that they can recover.  In fact, Andrew Bosomworth, the head of portfolio management for Pimco in Europe says that Greece, Ireland and Portugal must all quit the euro at least for a little while if they expect to survive….

“Greece, Ireland and Portugal cannot get back on their feet without either their own currency or large transfer payments.”

Sadly, most Americans don’t realize just how bad the situation in Europe is becoming.  This is truly a historic crisis that is unfolding.

German Chancellor Angela Merkel declared earlier this year that this is the biggest financial crisis that the EU has ever faced….

“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.”

So what is the answer?

Well, many are speculating that the EU could actually break up over this whole thing, but another possibility is that we could eventually see much greater integration.

In fact, for the first time the idea that “euro bonds” could be issued is gaining some traction.  This would spread the risk of European government debt throughout the European Union.  At this point, Andrew Bosomworth says that things have gotten so bad that it now seems inevitable that we will soon see the creation of euro bonds….

“Whether now or later, there is no way around a euro bond.”

So just how bad are things going to get in Europe? Well, earlier this year Anthony Fry, the senior managing director at Evercore Partners had the following to say about the emerging bond crisis in Europe….

“I don’t want to scare anyone but I am considering investing in barbed wire and guns, things are not looking good and rates are heading higher.”

So why should Americans care about all this?

Well, what is happening to these troubled European states is eventually going to happen to us.

If rates on U.S. government debt eventually hit 8 or 12 percent it will literally be financial armageddon in this country.  The U.S. government has piled up the biggest mountain of debt in the history of the world, and if we continue piling up debt at the pace that we are, then it will only be a matter of time before the IMF is demanding that we implement our own “austerity measures”.

As I have written about previously, there are already numerous indications that confidence in U.S. Treasuries is dying.  If that happens, we could literally see interest costs on the national debt double or even triple.

But it is not just the U.S. government that is in trouble.  A bloodbath in the municipal bond market has already started.  Hundreds of state and local governments across the United States are on the verge of bankruptcy.

So don’t laugh at what is going on in Ireland or Greece.  The next victims could be financially troubled states such as California and Illinois.

In the history of global finance, we have never faced a sovereign debt crisis like we are seeing now.  All over the globe governments are being suffocated by absolutely crushing debt loads.  Once a couple of dominoes fall, it is going to be really hard to keep the rest of the dominoes from falling.

This is the biggest crisis that the euro has ever faced.  At some point Germany will either be unwilling or unable to continuing rescuing the rest of the EU countries from the unsustainable mountains of debt that they have accumulated.  When that moment arrives, it is going to throw world financial markets into turmoil.

But this is what happens when we allow long-term debt bubbles to be created.  Eventually they always burst.

So keep your eye on the euro, because if a financial collapse does happen in Europe it is going to have a dramatic impact on the United States as well.

Currency Crisis! So What Happens If The Dollar And The Euro Both Collapse?

Some analysts are warning that the U.S. dollar is in danger of collapse because of the exploding U.S. government debt, the horrific U.S. trade deficit and the new round of quantitative easing recently announced by the Federal Reserve.  Other analysts are warning the the euro is in danger of collapse because of the very serious sovereign debt crisis that is affecting nations such as Greece, Portugal, Ireland, Italy, Belgium and Spain.  So what happens if the dollar and the euro both collapse?  Well, it would certainly throw the current world financial order into a state of chaos, but what would emerge from the ashes?  Would the nations of the world go back to using dozens of different national currencies or would we see a truly global currency emerge for the very first time?

Up until recently, the idea of a world currency was absolutely unthinkable for most people.  In fact, the notion that all of the major nations around the globe would agree to a single currency still seems far-fetched to most analysts.  However, if enough “chaos” is produced by a concurrent collapse of the U.S. dollar and the euro, would that be enough to get the major powers around the world to agree to a new financial world order?

Let’s hope not, but it is getting hard to deny that we are heading for a major currency crisis, and if the U.S. dollar and/or the euro collapse, the world will certainly never be the same afterwards.

In case you missed it, China and Russia made a very big announcement the other day.

They told the world that instead of using the U.S. dollar to trade with each other, they will now be using their own national currencies.

Most Americans don’t realize it, but that is a very, very big deal.

The fact that the U.S. dollar has been the primary reserve currency of the world for decades has given the United States a tremendous amount of economic power.

But now nations are beginning to lose confidence in the U.S. dollar and they are slowly starting to move away from it.

When the Federal Reserve announced a new round of quantitative easing in early November, it created a huge backlash from other nations.  For decades, many other countries have been heavily investing in dollar-denominated assets, and now they are quite upset that those assets are going to be devalued.

Chinese Finance Vice Minister Zhu Guangyao used very strong language in denouncing the Fed’s new quantitative easing scheme earlier this month….

“As a major reserve currency issuer, for the United States to launch a second round of quantitative easing at this time, we feel that it did not recognize its responsibility to stabilize global markets and did not think about the impact of excessive liquidity on emerging markets.”

German Finance Minister Wolfgang Schäuble was even more blunt.  He has called current Federal Reserve policy “clueless”, and he says that he is absolutely disgusted with the Federal Reserve at this point….

“They have already pumped an endless amount of money into the economy via taking on extremely high public debt and through a Fed policy that has already pumped a lot of money into the economy. The results are horrendous.”

So where is all of this going?

If the Federal Reserve keeps flooding the system with new dollars, the rest of the world could eventually totally reject the U.S. dollar and U.S. Treasuries.

If that day ever arrives, the results would be beyond catastrophic as the following short video from the National Inflation Association demonstrates….

But it is not just the U.S. dollar that is in trouble.

The euro is in danger as well.

Just consider the financial problems that some major European nations are experiencing right now….

*Standard & Poor’s has slashed Ireland’s credit rating two notches to “A”, and is warning that there could be further downgrades.  The Irish budget deficit is projected to reach 32 percent of national output this year.  Ireland’s finances are being called “just one big pyramid scheme”, and they recently accepted a huge European bailout.  Unfortunately for Ireland, this bailout comes with strings.  The Irish government is now being forced to implement an austerity program that is being referred to as “draconian”.

*Analysts are projecting that Portugal is going to need a bailout of at least 50 billion euros.  The government of Portugal has implemented some harsh austerity measures in an attempt to get the red ink under control, and the people are not pleased.  On Wednesday, a massive national strike shut down travel and basic services across the country.

*Things are so bleak in Portugal right now that Foreign Affairs Minister Luis Amado recently stated that his nation “faces a scenario of exit from the euro zone” if a solution is not found for this financial crisis.

*Greece was the first nation to need a European bailout, and now there are rumors that they may need even more assistance.  The statistics agency for the EU, Eurostat, recently revealed that Greece’s budget deficit for 2009 was actually 15.4% of GDP rather than 13.6% of GDP as originally thought.  The Greek national debt is now well over 120 percent of GDP.  The financial problems in Greece never seem to stop.

*Belgium’s debt has reached 100 percent of annual national income, and the cost of insuring that country’s debt has now hit record levels.

*Even Spain is in trouble.  Rates on Spanish 10-year government bonds have risen to frightening heights in recent days, and the official unemployment rate in Spain is hovering around 20 percent.

*In a recent article entitled “A Spanish Bailout Would Test Europe’s Strained Finances“, the New York Times quoted Jordi Galí, the director of the Center for Research in International Economics at Barcelona’s Pompeu Fabra University as saying that rumors that Spain is in financial trouble could end up making it a self-fulfilling prophecy….

“If investors expect Spain to have trouble refinancing its debt, now or somewhere down the road, then Spain will have trouble,” he added. “This is only aggravated by the fact that the reluctance of investors to purchase the country’s public debt leads to an increase in the interest rate it has to pay and thus in the budget deficit and the amount of debt it has to issue.”

So could this sovereign debt crisis actually cause the euro to collapse?

Well, it depends who you ask.

European Financial Stability Fund chief Klaus Regling says that there is “zero” chance that the euro will collapse….

“There is zero danger. It’s inconceivable that the euro would collapse.”

Other European leaders are not so sure about that.

EU President Herman Van Rompuy recently warned that if some of the weaker countries in Europe are forced to abandon the euro it will likely cause a total meltdown of the European Union….

“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.”

German Chancellor Angela Merkel is also warning that a failure of the euro could bring down the entire European Union….

“If the euro fails, then Europe fails.”

But is this likely to happen any time soon?

No, probably not, but in 2010 top European officials are actually acknowledging the possibility, and that shows just how serious things have gotten.

So if the U.S. dollar and the euro do collapse, what would happen?

Well, already many world leaders are openly speaking of the need for a true global currency.

After all, they argue, there won’t be any “currency wars” if we are all using the same currency.

In fact, the Institute of International Finance, an organization that represents 420 of the biggest banks and financial institutions on the globe, recently declared that the time has come to adopt a one world currency.

In fact, as I wrote in an article entitled “Bancor: The Name Of The Global Currency That A Shocking IMF Report Is Proposing“, a recent IMF policy paper actually proposed a name for the “global currency” that they believe could be coming….

A paper entitled “Reserve Accumulation and International Monetary Stability” by the Strategy, Policy and Review Department of the IMF recommends that the world adopt a global currency called the “Bancor” and that a global central bank be established to administer that currency. The report is dated April 13, 2010 and a full copy can be read here. Unfortunately this is not hype and it is not a rumor. This is a very serious proposal in an official document from one of the mega-powerful institutions that is actually running the world economy. Anyone who follows the IMF knows that what the IMF wants, the IMF usually gets. So could a global currency known as the “Bancor” be on the horizon? That is now a legitimate question.

So will any of this ever come to fruition?

Well, it would likely take one whale of a crisis to get the countries of the world to agree to such a thing.

However, we do live at a time when the world financial system seems to be perpetually on the edge of chaos.  If at some point the U.S. dollar and the euro totally fall apart perhaps we will see a “new order” arise out of all of that chaos.

But let’s hope not.  Once we give any organization the power to issue a global currency the odds of us ever getting our economic sovereignty back will be greatly reduced.  The internationalists are going to use any crisis as an opportunity to argue for greater centralization of the world financial system, and it will be very important for the American people not to fall for those arguments.

Hopefully the U.S. dollar and the euro can remain stable currencies for at least a little while longer.  Because once they collapse things will never, ever be the same again.

Could The Financial Crisis Erupting In Ireland, Portugal, Greece And Spain Lead To The End Of The Euro And The Break Up Of The European Union?

The Irish banking system is melting down right in front of our eyes.  Ireland, Portugal, Greece and Spain are all drowning in debt.  It is becoming extremely expensive for all of those nations to issue new debt.  Officials all over Europe are begging Ireland to accept a bailout.  Portugal has already indicated that they will probably be next in line.  Most economists are now acknowledging that without a new round of bailouts the dominoes could start to fall and we could see a wave of debt defaults by European governments.  All of this is pushing the monetary union in Europe to its limits.  In fact, some of Europe’s top politicians are now publicly warning that this crisis may not only mean the end of the euro, but also the end of the European Union itself.

Yes, things really are that serious in Europe right now.  In order for the euro and the European Union to hold together, two things have got to happen.  Number one, Germany and the other European nations that are in good financial condition have got to agree to keep bailing out nations such as Ireland, Portugal and Greece that are complete economic basket cases.  Number two, the European nations receiving these bailouts have got to convince their citizens to comply with the very harsh austerity measures being imposed upon them by the EU and the IMF.

Those two things should not be taken for granted.  In Germany, many taxpayers are already sick and tired of pouring hundreds of billions of euros into a black hole.  The truth is that the Germans are not going to accept carrying weak sisters like Greece and Portugal on their backs indefinitely.

In addition, we have already seen the kinds of riots that have erupted in Greece over the austerity measures being implemented there.  If there is an overwhelming backlash against austerity in some parts of Europe will some nations actually attempt to leave the EU?

Right now the focus is on Ireland.  The Irish banking system is a basket case at the moment and the Irish government is drowning in red ink.  European Union officials are urging Ireland to request a bailout, but so far Irish Prime Minister Brian Cowen is not taking the bait.  The Irish government does not seem too keen on having even more austerity measures imposed upon it by the EU and the IMF.

According to Nadeem Walayat, the harsh austerity measures that Ireland has endured during this past year have only made Ireland’s financial problems even worse….

The people of Ireland having endured over a year of austerity on the promise that it was all necessary to suffer pain today by cutting public spending so as to reduce the annual budget deficit to sustainable level for economic gains tomorrow. Instead the exact opposite is taking place as the Irish economy contracts due to economic austerity whilst its bankrupt banks are sending the countries debt and liabilities soaring, thus resulting in a far worse budgetary position than where Ireland was before the austerity measures were implemented as the bond markets are waking up to evitable debt default which is sending interest rates demanded to hold Irish debt soaring to new credit crisis highs.

But the big Irish banks are bleeding cash fast.  For example, the Bank of Ireland recently reported “a 10 billion euro outflow of deposits from early August until the end of September.”  Irish banks and the Irish government need help whether they are willing to admit it or not.

But Ireland is not the only one in trouble.  Portugal became the latest European nation to push the panic button when Portuguese Finance Minister Fernando Teixeira dos Santos announced that his country was in such bad financial shape that it might have to seek a bailout package.

Things are so bleak in Portugal right now that Foreign Affairs Minister Luis Amado says that his nation “faces a scenario of exit from the euro zone” if a solution is not found for this financial mess.

On top of all this, word is coming out that Greece is in even worse financial condition than initially believed.  The statistics agency for the EU, Eurostat, revealed on Tuesday that Greece’s deficit for 2009 was actually 15.4% of GDP rather than 13.6% of GDP as originally thought.

The Greek national debt is now well over 120 percent of GDP.  It seems inevitable at this point that Greece will need more bailouts if they are to remain part of the EU.

Spain is also starting to feel the heat.  Spain’s short-term debt financing costs jumped sharply on Tuesday, and officials in Spain are begging the Irish government to accept the bailout they are being offered so that the “contagion” does not spread.

But could a few mid-size countries in Europe really cause the next great global financial crisis?

Yes.

In the UK, veteran Conservative MP Peter Tapsell is warning that a total collapse in Ireland “could pose as great a threat to the world economy as did Lehman Brothers, AIG and Goldman Sachs in September 2008”.

Already we are seeing world financial markets getting rattled by all this news.

Fears regarding what is happening in Ireland, Greece, Spain and Portugal helped push the Dow Jones industrial average down nearly 200 points on Tuesday.

But the real story is that this financial crisis in Europe could potentially cause the break up of the euro and of the European Union.

The truth is that the euro and the European Union are inseparably linked at this point.  In fact, EU President Herman Van Rompuy is warning that if some of the weaker countries in Europe are forced to abandon the euro it will likely cause the total destruction of the European Union….

“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.”

German Chancellor Angela Merkel is also warning that a failure of the euro could bring down the entire European Union….

“If the euro fails, then Europe fails.”

But officials in Europe are not going to let the dream of a united Europe slip away easily.  Right now they are working really hard to keep Europe together, and that means some “tough love” has to be imposed on the “weak sisters”.  As these weaker European economies collapse, they are being forced to accept harsh EU mandates in exchange for bailouts.  As Ambrose Evans Pritchard recently pointed out, “forced austerity” is quite similar to serfdom….

Greece is now under an EU protectorate, or the “Memorandum” as they call it. This has prompted pin-prick terrorist attacks against anybody associated with EU rule. Ireland and Portugal are further behind on this road to serfdom, but they are already facing policy dictates from Brussels, but will soon be under formal protectorates as well in any case. Spain has more or less been forced to cut public wages by 5pc to comply with EU demands made in May. All are having to knuckle down to Europe’s agenda of austerity, without the offsetting relief of devaluation and looser monetary policy.

In the end, Europe is going to move in one of two directions.  Either this financial crisis will finally be the thing that breaks up the euro and the European Union, or it will result in a Europe that is ruled even more strongly by EU bureaucrats.

As this crisis unfolds over the next couple of years, the EU is going to try to grab more power and more control.  They are going to ask national governments to give up substantial amounts of power and sovereignty in exchange for bailouts.  So far it is working.

But at some point will one nation say that enough is enough?

Perhaps that one nation could be Ireland.  The citizens of Ireland actually voted “no” on the EU Constitution, but then the EU forced them to vote a second time so that they could “get it right”.

Wouldn’t it be ironic if it is Ireland that ends up lighting the fuse that breaks up the euro and the European Union?  The Irish are a fiercely independent people, and they have a history of resisting tyranny.

In any event, this is going to be an extremely interesting winter across the EU.  If things go badly, the entire global financial system could be plunged into mayhem.  Let us hope that does not happen.

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