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 With each passing day, the banking crisis in Europe escalates. European banks are having their credit ratings downgraded in waves, bond yields are soaring and billions of euros are being pulled out of banks all across the eurozone. The situation in Europe is rapidly going from bad to worse. It is almost like watching air being let out of a balloon. The key to any financial system is confidence, and right now confidence in banks in Greece, Italy, Spain and Portugal is declining at an alarming rate. When things hit the fan in Europe, it is going to be much safer to have your money in Swiss banks or German banks than in Greek banks, Spanish banks or Italian banks. Millions of people in Europe are starting to realize that a "euro" is not necessarily always going to be a "euro" and they are starting to panic. The Greek banking system is already on the verge of total collapse, and at this rate it is only a matter of time before we see some major Spanish and Italian banks start to fail. In fact it has already been announced that the fourth largest bank in Spain, Bankia, will be getting bailed out by the Spanish government. It is only a matter of time before we hear more announcements like this. Right now, events are moving so quickly in Europe that it is hard to keep up with them all. But this is what usually happens in the financial world. When things go well, it tends to happen over an extended period of time. When things fall apart, it tends to happen very rapidly. (Read More....)
 The results of the elections in France and Greece have made it abundantly clear that there is a tremendous backlash against the austerity approach that Germany has been pushing. All over Europe, prominent politicians and incumbent political parties are being voted out. In fact, Nicolas Sarkozy has become the 11th leader of a European nation to be defeated in an election since 2008. We have seen governments fall in the Netherlands, the UK, Spain, Ireland, Italy, Portugal and Greece. Whenever they get a chance, the citizens of Europe are using the ballot box to send a message that they do not like what is going on. It turns out that austerity is extremely unpopular. But if newly elected politicians all over Europe begin rejecting austerity, this puts Germany in a very difficult position. Should Germany be expected to indefinitely bail out all of the members of the eurozone that choose to live way beyond their means? If Germany pulled out of the euro tomorrow, the euro would absolutely collapse, bond yields for the rest of the eurozone would skyrocket to unprecedented heights, and without German bailout money troubled nations such as Greece would be headed directly for default. The rest of the eurozone is absolutely and completely dependent on Germany at this point. But as we have seen, much of the rest of the eurozone is sick and tired of taking orders from Germany and is rejecting austerity. A lot of politicians in Europe apparently believe that they should be able to run up gigantic amounts of debt indefinitely and that the Germans should be expected to always be there to bail them out whenever they need it. Will the Germans be willing to tolerate such a situation, or will they simply pick up their ball and go home at some point? (Read More....)
 What happens when debt-fueled false prosperity disappears? Just look at Spain. The 4th largest economy in the eurozone was riding high during the boom years, but now the Spanish economy is collapsing with no end in sight. When a debt bubble gets interrupted, the consequences can be rather chaotic. Just like we saw in Greece, austerity is causing the economy to slow down in Spain. But when the economy slows down, tax revenues fall and that makes it even more difficult to meet budget targets. So even more austerity measures are needed to keep debt under control and the cycle just keeps going. Unfortunately, even with all of the recently implemented austerity measures the Spanish government is still not even close to a balanced budget. Meanwhile, the housing market in Spain is crashing and unemployment is already above 24 percent. The Spanish banking system is a giant, unregulated mess that is on the verge of a massive implosion, and the Spanish stock market has been declining rapidly. The Spanish government is going to need a massive bailout and so will the entire Spanish banking system. But that is going to be a huge problem, because the Spanish economy is almost 5 times as large as the Greek economy. When the Spanish financial system collapses, the entire globe is going to feel the pain and there will be no easy solution. (Read More....)
 The economic crisis in Europe continues to get worse and eventually it is going to unravel into a complete economic nightmare. All over Europe, national governments have piled up debts that are completely unsustainable. But whenever they start significantly cutting government spending it results in an economic slowdown. So politicians in Europe are really caught between a rock and a hard place. They can't keep racking up these unsustainable debts, but if they continue to cut government spending it is going to push their economies into deep recession and their populations will riot. Greece is a perfect example of this. Greece has been going down the austerity road for several years now and they are experiencing a full-blown economic depression, riots have become a way of life in that country and their national budget is still not anywhere close to balanced. Americans should pay close attention to what is going on in Europe, because this is what it looks like when a debt party ends. Most of the nations in the eurozone have just started implementing austerity, and yet unemployment in the eurozone is already the highest it has been since the euro was introduced. It has risen for 10 months in a row and is now up to 10.8 percent. Sadly, it is going to go even higher. As economies across Europe slide into recession, that is going to put even more pressure on the European financial system. Most Americans do not realize this, but the European banking system is absolutely enormous. It is nearly four times the size that the U.S. banking system is. When the European banking system crashes (and it will) it is going to reverberate around the globe. The epicenter of the next great financial crisis is going to be in Europe, and it is getting closer with each passing day. (Read More....)
 Would America be a better place without Goldman Sachs? Of course it would. The "vampire squid" of Wall Street does not care about the future of America. Sadly, Goldman Sachs apparently does not even care much about their own clients. What Goldman Sachs is all about is making as much money as humanly possible. In the end, there is nothing wrong with making money, but there are constructive ways to make money and there are destructive ways to make money. Unfortunately, Goldman Sachs seems to find the destructive path almost irresistible. Greg Smith, the head of the U.S. equity derivatives business for Goldman Sachs in Europe, the Middle East and Africa made headlines all over the world on Wednesday when he resigned publicly from Goldman Sachs in a scorching editorial in the New York Times. Smith said that he could "honestly say that the environment now is as toxic and destructive as I have ever seen it". Considering what we know has gone on at Goldman over the past decade, that is very frightening to hear. So could this be the beginning of the end for Goldman Sachs? And if it is, will America be a better place when Goldman is gone? (Read More....)
 If the global economy is not heading for a recession, then why is global shipping slowing down so dramatically? Many economists believe that measures of global shipping such as the Baltic Dry Index are leading economic indicators. In other words, they change before the overall economic picture changes. For example, back in early 2008 the Baltic Dry Index began falling dramatically. There were those that warned that such a rapid decline in the Baltic Dry Index meant that a significant recession was coming, and it turned out that they were right. Well, the Baltic Dry Index is falling very rapidly once again. In fact, on February 3rd the Baltic Dry Index reached a low that had not been seen since August 1986. Some economists say that there are unique reasons for this (there are too many ships, etc.), but when you add this to all of the other indicators that Europe is heading into a recession, a very frightening picture emerges. We appear to be staring a global economic slowdown right in the face, and we all need to start getting prepared for that. (Read More....)
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