According to the Wall Street Journal, Greece staying in the eurozone is no longer “the base case” for European officials, and one even told the Journal that “literally nothing has been achieved” in negotiations with the new Greek government since the Greek election almost three months ago. In other words, you can take all of that stuff you heard about how the Greek crisis was fixed and throw it out the window. Over the next few months, a big chunk of Greek government bonds held by the IMF and the European Central Bank will mature. Unless negotiations produce a load of new cash for Greece, there will be a default, and right now there is very little optimism that we will see an agreement any time soon. In fact, as I wrote about the other day, behind the scenes banks all over Europe are quietly preparing for a Grexit. European news sources are reporting that the Greek banking system is on the verge of collapse, and over the past couple of weeks Greek bond yields have shot through the roof. Most of the things that we would expect to see in the lead up to a Greek exit from the eurozone are happening, and now we will wait and see if the Greeks actually have the guts to pull the trigger when push comes to shove.
It’s still possible that Greece can remain in the eurozone—though that is no longer the base case for many policy makers. At the very least, most fear the situation is going to get much, worse before it gets any better. No one now expects a deal to unlock Greek bailout funding at this week’s meeting of eurozone finance ministers in Riga—originally set as the final deadline for a deal. The new final, final deadline is now said to be a summit on May 11.
But among European politicians and officials gathered in Washington DC last week for the International Monetary Fund’s Spring Meetings, there was little optimism that a deal will be agreed by then.
The two sides are no closer to an agreement than when the Greek government took office almost three months ago. “Nothing, literally nothing has been achieved,” says an official.
Literally nothing has been achieved?
That is not what the mainstream media has been telling us over the past few months.
They kept telling us that agreements were in place and that everything had been fixed.
I guess not.
The Germans believe that the risks of a “Grexit” have already been priced in by the financial markets and that a Greek exit from the euro can be “managed” without any serious risk of contagion.
Greece’s Finance Minister Yanis Varoufakis said in an interview broadcast on Sunday that if Greece were to leave the euro zone, there would be an inevitable contagion effect.
“Anyone who toys with the idea of cutting off bits of the euro zone hoping the rest will survive is playing with fire,” he told La Sexta, a Spanish TV channel, in an interview recorded 10 days ago.
“Some claim that the rest of Europe has been ring-fenced from Greece and that the ECB has tools at its disposal to amputate Greece, if need be, cauterize the wound and allow the rest of euro zone to carry on.”
In this case, I believe that the Greeks are right about what a Grexit would mean for the rest of Europe and the Germans are wrong.
Once one country leaves the euro, that tells the entire world that membership in the euro is only temporary. Immediately everyone would be looking for the “next Greece”, and there are lots of candidates – Italy, Spain, Portugal, etc.
There is a very good chance that a Grexit would set off a full-blown European financial panic. And once a financial panic starts, it is very hard to stop. The danger that a Grexit poses is so obvious that even the Obama administration can see it…
A Greek exit from the euro zone would carry significant risks for the global economy and no one should be under the impression that financial markets have fully priced in such an event, the chairman of the White House Council of Economic Advisers said.
The comments by Jason Furman in an interview with Reuters in Berlin are among the strongest by a senior U.S. official and are at odds with those of German Finance Minister Wolfgang Schaeuble, who told an audience in New York last week that contagion risks from a so-called “Grexit” were limited.
“A Greek exit would not just be bad for the Greek economy, it would be taking a very large and unnecessary risk with the global economy just when a lot of things are starting to go right,” Furman said.
Meanwhile things continue to get even worse inside Greece. If you have any money in Greek banks, you need to move it immediately. The following comes from Zero Hedge…
Things for insolvent, cashless Greece are – not unexpectedly – getting worse by the day.
Following yesterday’s shocking decree that the government will confiscate local government reserves and “sweep” them into the central bank to provide the country more funds as it approaches another month of heavy IMF repayments, earlier today Bloomberg reported that the ECB would add insult to injury and may increase haircuts for Greek banks accessing Emergency Liquidity Assistance, thus “reining in” the very critical emergency liquidity which has kept Greek banks operating in recent weeks as the bank run sweeping the domestic banking sector has gotten worse by the day.
And many Greeks don’t even have any money to put in the banks because they haven’t been paid in months…
Meanwhile, the reality is that for a majority of the Greek population, none of this really matters because as Greek Ta Nea reports, citing Labor Ministry data, about one million Greek workers see delays of up to 5 months in salaries payment by their employers. The Greek media adds that about 45% of salaried workers in Greece make no more than €751 per month, the country’s old minimum wage; which also includes part-time workers.
No matter what European officials try, things just continue to unravel in Greece and in much of the rest of Europe.
We stand on the verge of the next great global economic crisis. The lessons that we should have learned from the last crisis were never learned, and instead global debt levels have exploded much higher since then. In fact, according to Doug Casey, the total amount of global debt is 57 trillion dollars higher than it was just prior to the last crisis…
In 2008, excess debt pushed the global financial system to the brink. It was a golden opportunity for governments and banks to reform the system. But rather than deal with the problem, they papered over it by issuing more debt. Worldwide debt levels are now $57 trillion higher than in 2008.
The eurozone as it is constituted today is doomed.
That doesn’t mean that the Europeans are going to give up on social, economic and political integration. It just means that we are entering a time of transition that is going to be extremely messy.
And once the European financial system begins to fall apart, the rest of the world will quickly follow.
Broke nations are bailing out other broke nations with borrowed money. Round and round we go – where we stop nobody knows. As of April, 41 different countries had active financial “arrangements” with the IMF. Sometimes they are called “bailouts” and sometimes they are called other things, but in every single case they involve loans. And most of the time, these loans come with very stringent conditions. It is a form of “global governance” that most people don’t even know about. For decades, the IMF has been able to use money as a way to force developing nations to do what it wants them to do. But up until fairly recently, this had mostly only been done with poor nations. But now an increasing number of wealthy nations are turning to the IMF for help. We have already seen Greece, Portugal, Ireland and Cyprus receive bailouts which were partly funded by the IMF, Spain has received a bailout for its banking sector, and as I noted yesterday, it is being projected that Italy will need a major bailout within six months. How long can this go on before the entire system collapses?
Well, that would depend on how much money the lender has.
And so where does the IMF get their money?
The IMF gets their money from a bunch of nations that are absolutely drowning in debt themselves.
The IMF is funded by “wealthy” nations that dominate the global economy. The following is how Wikipedia describes the IMF’s quota system…
The IMF’s quota system was created to raise funds for loans. Each IMF member country is assigned a quota, or contribution, that reflects the country’s relative size in the global economy. Each member’s quota also determines its relative voting power. Thus, financial contributions from member governments are linked to voting power in the organization.
These are the five largest contributors to IMF funding…
United States – 16.75%
Japan – 6.23%
Germany – 5.81%
France – 4.29%
UK – 4.29%
But those countries are in trouble themselves. The U.S. has a debt to GDP ratio of over 100%. Japan has a debt to GDP ratio of over 200%.
The truth is that these countries are funding the IMF with borrowed money.
So what happens when the contributors run out of money and can’t contribute anymore?
All over the globe, an increasing number of countries are reaching out to the IMF for help. For example, on Thursday we learned that Pakistan is getting a new bailout from the IMF…
Pakistan and the International Monetary Fund have reached an initial agreement on a bailout of at least $5.3 billion.
Pakistani Finance Minister Muhammad Ishaq Dar and IMF mission chief Jeffrey Franks announced the agreement at a press conference Thursday.
In recent months, a handful of neighboring countries such as Qatar have been keeping Egypt’s economy afloat by loaning the country’s central bank cash. That has bought Morsi government time to delay implementing the politically-sensitive measures the IMF has sought as a precondition before it gives Cairo a $4.8 billion credit line. In particular, the IMF had said that Egypt must raise taxes and begin phasing out fuel subsidies.
It’s not the only cash at stake. Other international donors have vowed another $9.7 billion for the country once the IMF program is in place. Roughly $1.55 billion in bilateral aid from Washington could also be held up: under U.S. law, the administration can’t loan money to countries where the military is involved in an unconstitutional change in government.
But what often happens with these bailouts is that the “conditions” that are imposed prove extremely difficult to meet. For example, Greece has not implemented all of the “reforms” that they were ordered to implement, and so the flow of future funds may be threatened…
As Greece looks set to miss a key reform deadline set by international lenders, which could jeopardize further financial aid, a Greek government minister said it wasn’t Greece’s fault that it couldn’t live up to the demands of a flawed bailout program.
“There are failures [by Greece],but you assume that the program that has been effectively imposed on us is perfect, which is far from the case,” Nikos Dendias, minister of Public Order and Citizen Protection, told CNBC on Thursday.
His comments come after Greek finance ministry officials said on Wednesday that Greece would not meet targets on reforming its public sector by the deadline set by international lenders, putting further financial aid in jeopardy.
Once a nation gets hooked on bailout money from the IMF or from other international sources, it can be very hard to get off of it. But that is what these globalist organizations like – they want to be able to use money as a form of control.
As we saw with Greece, sometimes a nation will need bailout after bailout. And it appears that is also going to be the case with Portugal. The Portuguese government is on the verge of collapsing and their financial situation is being described as “very fragile”…
Portugal had been held up as an example of a bailout country doing all the right things to get its economy back in shape. That reputation is now harder to sustain and even before this latest crisis, the International Monetary Fund reported last month that Lisbon’s debt position was “very fragile”.
Coming soon after the near-collapse of the Greek government, which has been given until Monday to show it can meet the demands of its own EU-IMF bailout, the euro zone may be on the brink of falling back into full-on crisis.
Right now, Portuguese bond yields are absolutely soaring and the Portuguese economy is rapidly heading into depression.
Portugal is going to desperately need the assistance of the IMF.
But what happens when the nations that primarily fund the IMF start failing themselves?
The U.S. is a complete and total financial disaster and so is Japan. Much of Europe is already experiencing a full-blown economic depression and even China is showing signs of trouble.
So if the “wealthy” nations fail, who is going to be there to help the “poor” nations?
Over the past couple of weeks, George Soros, the IMF and the World Bank have all issued incredibly chilling warnings about the possibility of an impending economic collapse. Considering the power and the influence that Soros, the IMF and the World Bank all have over the global financial system, this is very alarming. So are they purposely trying to scare the living daylights out of us? Soros is even warning of riots in the streets of America. Unfortunately, way too often top global leaders say something in public because they want to “push” events in a certain direction. Do George Soros and officials at the IMF and World Bank hope to prevent a worldwide financial collapse by making these statements, or are other agendas at work? We may never know. But one thing is for sure – many of the top financial officials in the world are using language that is downright “apocalyptic”, and that is not a good sign for the rest of 2012.
Right now, George Soros is saying things that he has never said before. Just check out what George Soros recently told Newsweek….
“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”
Later on in that same article, Soros is quoted as saying that we could soon see the U.S. government using “strong-arm tactics” to crack down on rioting in the streets of major U.S. cities….
As anger rises, riots on the streets of American cities are inevitable. “Yes, yes, yes,” he says, almost gleefully. The response to the unrest could be more damaging than the violence itself. “It will be an excuse for cracking down and using strong-arm tactics to maintain law and order, which, carried to an extreme, could bring about a repressive political system, a society where individual liberty is much more constrained, which would be a break with the tradition of the United States.”
It almost sounds like George Soros is anticipating the same kind of a breakdown of society that many survivalists and preppers are getting ready for.
So how bad are things going to get?
Well, George Soros is publicly warning that the coming financial crisis could end up being even worse than 2008. Just check out the following quotes from him that appeared in a recent Businessweek article….
Billionaire investor George Soros said Europe’s sovereign-debt woes are “more serious” than the financial crisis of 2008 and that the world faces the prospect of a “vicious circle” of deflation.
“We have a more dangerous situation now than in 2008,” Soros, 81, said in response to a question at an event in the southern Indian city of Bangalore today. “The crisis in Europe is more serious than the crash of 2008.”
But George Soros is not the only one issuing these kinds of warnings.
Once again, the head of the IMF, Christine Lagarde, has made a speech in which she openly warned that we are heading for a repeat of the “1930s”.
She told an audience in Berlin on Monday that the globe is facing “a 1930s moment, in which inaction, insularity and rigid ideology combine to cause a collapse in global demand”.
During the speech she called for a trillion more dollars to support financially troubled governments, and she made the following statement….
“It is not about saving any one country or region. It is about saving the world from a downward economic spiral.”
As I wrote about the other day, the World Bank has also been using apocalyptic language about the global financial situation. In a shocking new report, the World Bank revised GDP growth estimates for 2012 downward very sharply, it warned that Europe could be facing financial collapse at any time, and it instructed the rest of the world to “prepare for the worst.”
The lead author of the report, Andrew Burns, said that the “importance of contingency planning cannot be stressed enough” and that if there is a major financial crisis in Europe the entire globe will be deeply affected….
“An escalation of the crisis would spare no-one. Developed- and developing-country growth rates could fall by as much or more than in 2008/09.”
So should we be alarmed that George Soros, the IMF and the World Bank are all proclaiming that a financial nightmare could be just around the corner?
Of course we should be.
Whether their motives are pure or not, they are telling the truth about the global financial situation in this case. As I have written about so frequently, there are a whole host of signs that indicate that we could be on the verge of a major global recession.
A lot of folks in the investment world are warning that hard times are about to hit us as well. For example, the following is what legendary investor Joseph Granville recently told Bloomberg Television….
Joseph Granville, whose “sell everything” call in 1981 sparked a decline in U.S. stocks, said the Dow Jones Industrial Average (INDU) will drop toward 8,000 this year because of waning momentum and volume.
“Volume precedes prices,” Granville, 88, a technical analyst who has been publishing the Granville Market Letter from Kansas City, Missouri for about 50 years, said in an interview on “Street Smart” on Bloomberg Television. “You are seeing much lower volume. That tells you that prices are going to go much lower, much lower than most people think possible and very few people have projected.”
But unfortunately, a lot of people are just going to leave their holdings sitting out there like a dead duck, and they are going to be absolutely devastated by the coming financial tsunami.
Those that believe that the United States can somehow escape the coming financial storm don’t really know what they are talking about.
In fact, there was very troubling news for the U.S. dollar just the other day. It was announced that India will start paying for its oil from Iran in a currency other than U.S. dollars.
But this is just another sign that the rest of the world is starting to reject the U.S. dollar. For decades, the U.S. dollar has been the reserve currency of the world and this has given us a tremendous advantage. Unfortunately for us, that is now changing.
U.S. newspapers are not talking about what is going on, but mainstream newspapers in Europe are. Right now, some of the biggest countries in the world are working on plans to quit using U.S. dollars for the buying and selling of oil.
In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.
This is a very big deal, and if this gets pulled off it is going to have devastating consequences for the U.S. dollar and for the U.S. economy.
But of course when it comes to troubles for the U.S. financial system, there are a whole host of issues that could be talked about.
An environment for a “perfect storm” is developing, and most Americans have absolutely no idea what is about to happen.
Fortunately, there are some researchers out there that are working hard to sound the alarm bells. For example, the following quote comes from a recent interview with Gerald Celente….
I believe that we have to watch out for something along the lines of an economic martial law. The European system is in collapse. The financial system in the United States is just as tenuous, if not more, and I believe they will not admit there will be a financial crash but rather they will use a geo-political issue to get the people in a state of fear and hysteria whereby they’ll then call a bank holiday or devaluation of the currency, or a hyperinflation of the currency, and blame it on somebody else.
It would be wise to listen to what experts such as Gerald Celente are saying.
Just because things have “always” been a certain way does not mean that they will continue to be that way.
Just because certain things have “always” worked in the past does not mean that they will continue to work in the future.
Our world is experiencing fundamental changes. It is changing at a faster pace than we have ever seen before. The way that we all live our lives five or ten years from now will be vastly different from how we live our lives today.
This will be a very challenging time to be alive, but it is also going to be a very exciting time to be alive.
So what do all of you think is going to happen in 2012?
Please feel free to leave a comment with your thoughts below….
Barring an economic bailout of mammoth proportions, the economy of Spain is completely and totally doomed. The socialist government of Spain is drowning in debt, unemployment is running rampant and everywhere you turn there are major economic problems. So will Spain be the next Greece? No. When the economy of Spain implodes it is going to be a whole lot worse for the world economy. The economy of Spain is more than four times the size of the economy of Greece. Spain accounts for 11.5 percent of eurozone GDP while Greece only accounts for approximately 2.5 percent. Spain is the 4th largest economy in the 16 nation eurozone and it is the 10th largest economy in the world. If the economy of Spain fails it will cause a shockwave that will be felt in every corner of the globe. In fact, there are quite a few analysts that believe if Spain defaults it would ultimately lead to the breakup of the eurozone.
So will the EU step up and bail out Spain? Well, there are rumors that EU officials have begun work on a bailout package for Spain which is likely to run into the hundreds of billions of dollars, but on Monday the European Commission, the Spanish government and the German government all denied that the European Union was preparing a bailout for the Spanish economy.
Of course we all know that politicians don’t always tell us the truth.
So who knows what is going on over there right now.
But the reality is that the economy of Spain is not going to make it much longer without serious help, and some EU officials are already using apocalyptic language to describe what an economic collapse in Spain would mean.
For example, EU Commission President Jose Manuel Barroso recently warned that democracy could completely collapse in Greece, Spain and Portugal unless urgent action is taken to tackle the burgeoning European debt crisis.
So could democracy actually fail in those nations?
Well, considering the fact that Greece, Spain and Portugal only became democracies in the 1970s, and that all three of those countries have a history of military coups, such a scenario is not that far-fetched.
Without a doubt there would be serious public unrest in those nations if public services collapsed because their governments ran out of money.
So are there signs that the economy of Spain is about to collapse?
Well, yes, there are quite a few of them.
The following are 9 reasons why Spain is a dead economy walking….
#1) Even before this most recent crisis, unemployment in Spain was approaching Great Depression levels. Spain now has the highest unemployment rate in the entire European Union. More than 20 percent of working age Spaniards were unemployed during the first quarter of 2010. If people aren’t working they can’t pay taxes and they can’t provide for their families.
#2) In an effort to stimulate the economy, Spain’s socialist government has been spending unprecedented amounts of money and that skyrocketed the government budget deficit to a stunning 11.4 percent of GDP in 2009. That is completely unsustainable by any definition.
#4) The Spanish government has accumulated way more debt than it can possibly handle, and this has forced two international ratings agencies, Fitch and Standard & Poor’s, to lower Spain’s long-term sovereign credit rating. These downgrades are making it much more expensive for Spain to finance its debt at a time when they simply can’t afford to pay more interest on their debt.
#5) There are 1.6 million unsold properties in Spain. That is six times the level per capita in the United States. Considering how bad the U.S. real estate market is, that statistic is incredibly alarming.
#6) The new “green economy” in Spain has been a total flop. Socialist leaders promised that implementing hardcore restrictions on carbon emissions and forcing the nation over to a “green economy” would result in a flood of “green jobs”. But that simply did not happen. In fact, a leaked internal assessment produced by the government of Spain reveals that the “green economy” has been an absolute economic nightmare for that nation. Energy prices have skyrocketed in Spain and the new “green economy” in that nation has actually lost more than two jobs for every job that it has created. But Spain so far seems unwilling to undo all of the crazy regulations that they have implemented.
#7) Spain’s national debt is so onerous that they are now caught in a debt spiral where anything they do will harm the economy. If they cut government expenditures in an effort to get debt under control it will devastate economic growth and crush badly needed tax revenues. But if the Spanish government keeps borrowing money their credit rating will continue to decline and they will almost certainly default. The truth is that the Spanish government is caught in a “no win” situation.
#8) But even now the IMF is projecting that the Spanish economy is going nowhere fast. The International Monetary Fund says there will be no positive GDP growth in Spain until 2011, at which point it will still be below one percent. As bleak as that forecast is, many analysts believe that it is way too optimistic considering the fact that Spain’s economy declined by about 3.6 percent in 2009 and things are rapidly getting worse.
#9) The Spanish population has gotten used to socialist handouts and they are not going to accept public sector pay cuts, budget cuts to social programs and hefty tax increases easily. In fact, there is likely to be some very serious social unrest before all of this is said and done. On May 21st, thousands of public sector workers took to the streets of Spain to protest the government’s austerity plan. But that was only an appetizer. Spain’s two main unions are calling for a major one day general strike to protest the government’s planned reforms of the country’s labor market. The truth is that financial shock therapy does not go down very well in highly socialized nations such as Greece and Spain. In fact, the austerity measures that Spain has been pressured to implement by the IMF have proven so unpopular that many are now projecting that Spain’s socialist government will be forced to call early elections.
So what is going to happen in Spain?
The truth is that nobody can predict for sure how things are going to play out over the coming weeks and months.
But what everyone can agree on is that the stakes are incredibly high.
But right now the entire population of Spain (along with much of the rest of the world) is completely distracted by the World Cup. As long as the Spanish team does well, that is likely to keep the Spanish population sedated. But if the Spanish team gets knocked out of the tournament early that will put the entire Spanish population in a really, really bad mood and that could mean a really chaotic summer for the nation of Spain.
The summer of 2010 promises to be the most tumultuous summer in the short history of the European Union. The sovereign debt crisis sweeping the continent threatens to cause economic and political instability on a scale not seen in Europe for decades. The truth is that governments across the eurozone have accumulated gigantic piles of debt that simply are not sustainable. Prior to the implementation of the euro, these European governments often “printed” their way out of messes like this, but now they can’t do that. Now they either have to dramatically cut government expenses or they have to default. But the austerity measures that the IMF and the ECB are pressuring these European governments to adopt are likely to have some very painful side effects. Not only will these austerity measures cause a significant slowdown in economic growth, they are also likely to cause the same kinds of protests, strikes and riots that we saw in Greece to erupt all over Europe.
You see, most Europeans have become very accustomed to the social welfare state. Tens of millions of Europeans aren’t about to let anyone cut their welfare payments or the wages on their cushy government jobs. In most of the European nations that are experiencing big financial problems there are very powerful unions and labor organizations that do not want anything to do with austerity measures and that are already mobilizing.
As the IMF and the ECB continue to push austerity measures all over Europe this summer, the chaos that we witnessed in Greece could end up being repeated over and over again across the continent. This could truly be Europe’s summer of discontent.
The following are just a few of the countries that we should be watching very carefully in the months ahead….
In many ways, the economic situation in Spain is now even worse than the economic situation in Greece. Spain’s unemployment was already above 20 percent even before this recent crisis. There are now 4.6 million people without jobs in Spain. There are 1.6 million unsold properties in Spain, six times the level per capita in the United States. Total public/private debt in Spain has reached 270 percent of GDP.
For Spain it has been a horrible week. The central bank seized CajaSur and imposed draconian write-down rules on banks to restore confidence. The Spanish Socialist and Workers Party (PSOE) of Jose Luis Zapatero then rammed a 5pc cut in public wages through the Cortes by a single vote, shattering consensus. The government cannot hope to pass a budget. Its own trade union base is planning a general strike.
The austerity measures that Spain has been pressured to implement have proven so unpopular in Spain that many are now projecting that Spain’s socialist government will be forced to call early elections.
Spain finds itself in a very difficult position. They have a debt that they cannot possibly handle, the IMF and the ECB are pressuring Spain to implement austerity measures which are wildly unpopular with the public, and if Spain does implement those austerity measures it may send the Spanish economy into a downward spiral.
In addition, the fact that Fitch Ratings has stripped Spain of its AAA status has pushed Spain to the edge of financial oblivion.
A recent editorial inEl Pais spoke of the “perverse spiral” that Spain’s economy is entering….
“The Fitch note drives home the apparently unsolvable contradiction in which the Spanish economy finds itself. To maintain debt solvency Spain must squeeze public spending: yet this policy undermines the chances of recovery which itself causes further loss of confidence.”
And Spain’s very powerful labor organizations are not about to take these austerity measures sitting down. In fact, the two largest trade unions in Spain are already calling for a general strike.
But French citizens are not too keen on belt-tightening. We all remember the massive riots in France a few years ago when it was proposed the the work week should be shortened. It certainly seems unlikely that the French will accept “tough budget decisions” without making some serious noise.
The Italian government recently approved austerity measures worth 24 billion euros for the years 2011-2012. But the Italian public is less than thrilled about it.
And the truth is that Portugal desperately needs to do something to get their finances under control. Recent EU data shows that Portugal’s total debt is 331 percent of GDP, compared to only 224 percent for Greece.
So will the Portuguese public accept these austerity measures?
It doesn’t seem likely.
In fact, Fernando Texeira dos Santos, Portugal’s finance minister, says that he expects “violent episodes” comparable to those in Greece but insists that there is no other option.
“Either we come up with a very strong reaction or we will be reduced to bread and water.”
They have already been rioting in the streets in Romania.
Tens of thousands of workers and pensioners recently took to the streets in Romania to protest the harsh austerity measures that the Romanian government is imposing at the request of the International Monetary Fund.
The Romanian people have been through incredibly hard times before, and they aren’t about to let the IMF and the ECB impose strict austerity measures on them without a fight.
It is being reported that Germans are bracing themselves for a “bitter” round of government budget cuts. It seems that even Germany has some belt-tightening to do.
In addition, resentment is rising fast in Germany as the population there realizes that it is Germany that is going to be the one funding a large portion of the bailouts for these other European nations.
How long will the German people be able to control their tempers?
Well, the Irish have gotten into a ton of debt, and they are now finding it very expensive to finance new debt. The Irish government is now paying approximately 2.2 percentage points more than Germany is to borrow money for 10 years, while Spain (even with their economy in such a state of disaster) only has to pay 1.6 percentage points more than Germany.
But if “austerity measures” come to Ireland, how do you think the public will react?
It likely would not be pretty.
The United Kingdom
The exploding debt situation in the U.K. was a major issue in the most recent election. David Cameron promised the voters to get the U.K.’s exploding debt situation under control. But the coming budget cuts are likely to be incredibly painful. In fact, Bank of England governor Mervyn King has even gone so far as to warn that public anger over the coming austerity measures will be so painful that whichever party is seen as responsible will be out of power for a generation.
But it isn’t just national governments that are in trouble in Europe. The European Central Bank is warning that eurozone banks could face up to 195 billion euros in losses during a “second wave” of economic problems over the next 18 months.
The truth is that almost everyone is expecting the next couple of years to be very tough economically all across Europe.
But the vast majority of the European public is not going to understand the economics behind what is happening. All most of them are going to know is that the budget reductions, tax increases and pay cuts really, really hurt and that is likely to result in a whole lot of anger.
When Europeans get really angry it isn’t pretty. If what happened in Greece is any indication, this upcoming summer and fall could be a really wild one throughout Europe.
“Euroland, burned down. A continent on the way to bankruptcy” -The front page of Der Spiegel, May 5th, 2010
Up to this point, it seems as though most Americans have not really been too concerned about the financial meltdown that is taking place in Greece. But they should be. The truth is that the debt crisis we see playing out in Greece may soon repeat itself in some of the largest nations in the world such as Japan, the U.K. and even the United States. Once upon a time, this kind of thing only happened in third world nations, but now virtually every nation on earth has a debt problem. As the saying goes, the borrower is the servant of the lender, and so when a country like Greece gets in way, way too deep financially, it ends up having to give up a portion of its sovereignty to those controlling the purse strings. In the case of Greece, those controlling the purse strings are the IMF and the EU. But it just isn’t Greece that is in trouble. Dozens of nations are in serious financial trouble and are at the mercy of those who can bail them out. The truth is that global financial institutions like the IMF, the World Bank, the European Central Bank and the Federal Reserve are increasingly gaining power all over the globe as governments around the world continue to accumulate frightening amounts of debt.
This has been quite a week for Greece and for the other nations in Europe teetering on the edge of financial disaster. Standard & Poor’s reduced Greek debt to “junk” status, and Spain and Portugal’s debts were also downgraded substantially. These unprecedented steps by Standard & Poor’s have many concerned that this financial “contagion” could start spreading across all of Europe.
We’ll take a look at the “austerity measures” being forced on Greece in a moment, but first it is important to note that financial panic is already spreading to other nations in the region.
In Portugal, the government has announced that additional “austerity measures”, beyond those in the current three year plan, are expected to be implemented. Perhaps they wouldn’t need to take such drastic steps if they hadn’t spent all of those millions constructing those shiny new soccer stadiums a few years ago. But in any event, many analysts are now forecasting that Portugal will be the next domino to fall.
Officials in Spain are expected to announce this week that unemployment has hit 20%. But of course any nation that implements a hardcore “cap and trade” law like the one in Spain should expect unemployment to soar into the stratosphere. So they are just reaping what they have sown, but the fallout could end up being very painful. Spain’s economy is approximately five times larger than Greece’s so if Spain ends up defaulting it will create a financial nightmare for all of Europe.
There are now rumors that even Italy and Ireland are in a massive amount of trouble financially.
So will the EU and the IMF end up having to bail all of them out?
Well, for now Greece is first in line.
European officials said on Friday that the Greek government, facing a rapidly deteriorating financial situation, is close to completing negotiations for assistance from the International Monetary Fund.
So Greece is going to get the money that it needs – but it comes with strings.
Greece must surrender some of its fiscal sovereignty and adopt a three year program of severe spending cuts and higher taxes.
In fact, one major Greek newspaper says that wage and job cuts for public workers will also be ordered alongside the spending cuts and tax increases to get through what they are calling “three hard years”.
They get paid extremely well, and Greek civil servants also enjoy very generous pension benefits and early retirement.
Needless to say a lot of these Greek civil servants are not happy at all about the changes the IMF is forcing upon them, and they have called a general strike for May 5th.
For his part, the Greek Prime Minister, George Papandreou, is trying to convince the Greek people that these new spending cuts and tax increases are necessary to keep his nation afloat. According to The Associated Press, Mr. Papandreou recently told the Greek Parliament the following….
“The measures we must take, which are economic measures, are necessary for the protection of our country — for our survival, for our future, so we can stand firmly on our feet.”
There are even fears that this sovereign debt crisis could spell the end for the Euro. Back on Wednesday, the leaders of the 16 countries currently using the Euro called an emergency meeting to attempt to avert a Euro meltdown triggered by Greece’s financial collapse.
Of course the Euro is not actually going to collapse, but the fact that they all felt the need to get together and talk about this situation is quite telling.
In fact, the language used by some of the top financial authorities in the world when speaking about the Greek debt crisis is quite alarming….
Angel Gurría, head of the Organization for Economic Cooperation and Development:
“This is like Ebola. It’s threatening the stability of the financial system.”
Colin Ellis, economist at Daiwa Capital Markets:
“The time for horse-trading, prevarication and posturing is over. Arguably, the very future of the euro area is now teetering on a knife edge.”
Dominique Strauss-Kahn, head of the International Monetary Fund:
“If we don’t fix it in Greece, it may have a lot of consequences on the EU.”
But for the people of Greece, getting help with their debt means giving up their ability to determine their own affairs. They have gotten into so much debt that now they are forced to do whatever the IMF and the EU tell them to do. Of course there are many in Greece who are extremely upset by this as evidenced by the recent riots there….
But this is what happens when a nation allows itself to get into way too much debt. In fact, this has been done by design in third world nations for decades. In his extraordinary book, Confessions of an Economic Hitman, John Perkins explained how it was his job to go around the world and get third world governments to accept multibillion-dollar loans that he knew they would never be able to repay. Of course when the time came and they could not repay the loans, the big global institutions would go in and confiscate natural resources and impose “conditions” and implement “austerity measures” similar to the ones they are currently imposing on Greece.
The alarming thing today is that it just isn’t third world nations where this game is being played anymore. Now that they have perfected the blueprint, they are trying it out on nations like Greece.
The reality is that this is all part of the push towards globalization. In fact, Jean-Claude Trichet, the president of the European Central Bank, emphasized the need for global coordination in financial matters during his April 26th address at the Council on Foreign Relations.
“Global coordination” sounds nice, but just like “global governance” and “global cooperation”, it is just another way of saying that we need to transfer more power and more authority to globalist institutions.
You see, whatever problem that pops up (in this instance it is the Greek debt crisis), the solution always seems to be to transfer more power to global institutions.
In fact, as a “solution” to the global financial crisis, the IMF is proposing two new taxes on financial institutions worldwide: a “financial stability contribution” which levies a small charge on financial institution balance sheets, and a “financial activities tax”, which would tax “excess profits” and bonuses.
As the nations of the world continue to get deeper in debt, and as more power and more money is transferred to unelected global institutions, the people of the world may find their lives increasingly being run by heartless bureaucrats on the other side of the globe.
For anyone who loves freedom, that is a very sobering thought.
Today financial power is being concentrated in the hands of fewer and fewer individuals. In fact, the six biggest banks in the United States now possess assets equivalent to 60 percent of America’s gross national product. Back in the 1990s that figure was less than 20 percent. These six banks – Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo – literally dictate what goes on in the U.S. banking industry. These entities are the poster children for “too big to fail”, and they donate massive amounts of cash to the campaigns of both Republicans and Democrats to ensure that they will continue to receive favorable treatment. The vast majority of Americans have had a banking account, a credit card and/or a mortgage with one of these institutions at some point. If they acted in concert, these six banks could literally bring down the U.S. economy overnight if they wanted to. Together with the Federal Reserve, these six banks represent the real financial power in America. They are the 800 pound gorilla in the room that influences nearly every major financial deal that gets done and virtually every major political decision that gets made. As the last couple of years have demonstrated, top politicians from both parties (John McCain and Barack Obama for example) will instantly jump into action and start advocating that the U.S. government spend billions upon billions of dollars when the interests of these behemoths are threatened. The frightening thing is that the power of these megabanks is growing at a frightening pace. As dozens upon dozens of smaller U.S. banks are “allowed to fail”, they either go out of existence or the Feds actually encourage these smaller banks to sell themselves to one of the big sharks. In either event, the banking power in the United States becomes further consolidated in the hands of the megabanks.
Bill Moyers: And you write that they control 60 percent of our gross national product?
James Kwak: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.
Does it alarm you that the banking elite have accumulated such a large amount of financial power?
It should. These institutions have the power to wreck entire economies. Just consider what happened in Greece lately. Now, it is being alleged that the megabanks are ripping off American cities with the same kinds of predatory deals that brought down the financial system in Greece.
The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.
Unfortunately, they may have actually been understating things a bit.
These megabanks have rigged the game so that the wealth of the nation is slowly transferred from us to themselves and to the international financial interests that control them.
They can make money if the markets are going up, and they can make money if the markets are going down.
For example, in a newly released email from the height of the housing crash, the CEO of Goldman Sachs bragged that his firm “made more than we lost” by betting against the housing market.
Thankfully the SEC is starting to look into the fraud that Goldman Sachs committed during this time period, but the truth is that Goldman is not likely to receive any more than a slap on the wrist for what it has done.
They are way too big, way too powerful and have too many friends in high places for them to get into any real trouble.
For example, it has come out that Barack Obama does not intend to return any of the campaign contributions that he received from Goldman Sachs. And surely they will be glad to continue to pour big money into his political coffers.
So where does that leave the rest of us?
Well, the rest of us can expect higher taxes and a lower standard of living according to the IMF. The IMF (which has deep connections to these megabanks) says that the party is “over” for nations that have been enjoying the good life. In a recent article, the Washington Post summarized the message that the IMF is trying to communicate through their recent policy papers….
To keep the global economy on track, people in the United States and the rest of the developed world need to work longer before retiring, pay higher taxes and expect less from government. And the cheap imports lining the shelves of mega-chains such as Wal-Mart and Target? They need to be more expensive.
So are you ready to work longer, pay higher taxes, expect less from government and have a lower standard of living?
That is what the IMF says we are all going to be facing in the years ahead.
We are all going to financially suffer as the megabanks continue to thrive and consolidate power.
The recent economic collapse in Greece has caused a significant weakening of the Euro and has created a measure of financial panic all over Europe. So what solutions are being put forward by the governments of Europe? More centralization, more globalization and more power for the EU. For example, the German and French finance ministers have formulated a draft plan that would significantly strengthen “financial policy cooperation” within the EU. In essence, the plan would create the framework for a “European economic government” that would have substantial power over the economic decisions of member nations. But if Brussles continues to swallow more and more economic power, where does that do to the governments of individual member nations?
The chair of the European Commission, Jean-Claude Juncker, who received the new proposal from German Finance Minister Wolfgang Schäuble and French Finance Minister Christine Lagarde is quoted as saying that some form of “European economic government” is needed to ensure that a crisis such as the one that has happened in Greece does not happen in the future….
“We need a European economic government in the sense of strengthened coordination of economic policy within the euro zone.”
It certainly seems as though almost every issue that comes up in Europe these days is an excuse for the EU to grab even more authority. Is Brussels destined to become a blackhole that ultimately sucks in all power and authority in Europe whether anyone likes it or not?
Not that this kind of thing isn’t happening on a global level as well.
These days the IMF is constantly pushing for more power and authority over world financial affairs.
In fact, IMF chief Dominique Strauss-Kahn said on Friday that the International Monetary Fund wants new authority to supervise the global financial system. In addition, Strauss-Kahn has been openly advocating the creation of a global reserve currency that would compete with (and ultimately replace) the U.S. dollar in global trade.
So is all of this centralization and globalization a good thing? Is it right that the economic decisions for the planet are increasingly being made by a handful of very powerful men that we never even elected?
If we continue to hand authority to unelected bodies outside of our home countries, what will that do to our own political power? If we do not even have the power to vote out those who are controlling our economic destinies, then how could we ever possibly hope to change things?
Those are some very important questions. But the truth is that the powers that be are going to continue to push globalization and centralization on all of us. It is up to you and I to tell them what we think about it.