The Air Has Been Let Out Of The Balloon

Do you hear that sound?  It is the sound of Europe being hit with a cold dose of financial reality.  The air has been let out of the balloon, and investors all over the world are realizing that absolutely nothing has been solved in Europe.  The solutions being proposed by the politicians in Europe are just going to make things worse.  You don’t solve a sovereign debt crisis by shredding confidence in sovereign debt.  But that is exactly what the “voluntary 50% haircut” has done.  You don’t solve a sovereign debt crisis by pumping up your “bailout fund” with borrowed money from China, Russia and Brazil.  More debt is just going to make things even worse down the road.  You don’t solve a sovereign debt crisis by causing a massive credit crunch.  By giving European banks only until June 2012 to dramatically improve their credit ratios, it is going to force many of them to seriously cut back on lending.  A massive credit crunch would significantly slow down economic activity in Europe and that is about the last thing that the Europeans need right now.  If the deal that was reached last week was the “best shot” that Europe has got, then we are all in for a world of hurt. (Read More...)

Let Them Eat Cake: 10 Examples Of How The Elite Are Savagely Mocking The Poor

There is absolutely nothing wrong with working hard and making a lot of money, but there is something wrong with being completely arrogant and smug about it.  Today, many among the elite are savagely mocking the poor, and that is a huge mistake.  You shouldn’t kick people when they are down.  There are tens of millions of Americans that are deeply frustrated about losing their homes, losing their jobs or barely being able to survive in this economy.  These frustrations have been one of the primary reasons for the rise of the Tea Party movement and the rise of the Occupy Wall Street movement.  What these movements have in common is that people in both movements are sick and tired of the status quo and they want something to be done about our broken system.  There are huge numbers of families out there right now that have just about reached the end of their ropes.  Instead of showing compassion, many of the ultra-wealthy have decided that it is funny to mock the poor and those that are suffering.  So how are all of these protesters going to respond to the “let them eat cake” attitude of the Wall Street elite?  The protesters are being told that nothing that they can do will change anything and that they should be grateful for what Wall Street and the ultra-wealthy have done for them.  They are essentially being told that they should just shut up and go home.  So will we see these protest movements become discouraged and die down, or will the patronizing attitudes of so many among the elite just inflame them even further? (Read More...)

Be Honest – The European Debt Deal Was Really A Greek Debt Default

Once the euphoria of the initial announcement faded and as people have begun to closely examine the details of the European debt deal, they have started to realize that this “debt deal” is really just a “managed” Greek debt default.  Let’s be honest – this deal is not going to solve anything.  All it does is buy Greece a few months.  Meanwhile, it is going to make the financial collapse of other nations in Europe even more likely.  Anyone that believes that the financial situation in Europe is better now than it was last week simply does not understand what is going on.  Bond yields are going to go through the roof and investors are going to start to panic.  The European Central Bank is going to have an extremely difficult time trying to keep a lid on this thing.  Instead of being a solution, the European debt deal has brought us several steps closer to a complete financial meltdown in Europe. (Read More...)

Europe Tries To Kick The Can Down The Road But It Will Only Lead To Financial Disaster

Have you heard the good news?  Financial armageddon has been averted.  The economic collapse in Europe has been cancelled.  Everything is going to be okay.  Well, actually none of those statements is true, but news of the “debt deal” in Europe has set off a frenzy of irrational exuberance throughout the financial world anyway.  Newspapers all over the globe are declaring that the financial crisis in Europe is over.  Stock markets all over the world are soaring.  The Dow was up nearly 3 percent today, and this recent surge is helping the S&P 500 to have its best month since 1974.  Global financial markets are experiencing an explosion of optimism right now.  Yes, European leaders have been able to kick the can down the road for a few months and a total Greek default is not going to happen right now.  However, as you will see below, the core elements of this “debt deal” actually make a financial disaster in Europe even more likely in the future. (Read More...)

The One Percent: Gigantic Government + Gigantic Corporations = Massive Wealth Inequality In America

Today, there are protests all over America that are targeting “the one percent” and all of the wealth and power that they have accumulated.  Unfortunately, many of the solutions that these protesters are advocating simply will not work and will not lead to less wealth inequality.  To understand this, you have to understand how we got to this point.  Over the past several decades, our federal government has exploded in size and our large corporations have exploded in size.  In fact, we have seen this pattern happen pretty much all over the world.  Governments and corporations all over the globe are getting much bigger.  Whenever you have very, very large concentrations of money and power like that, it is going to lead to massive wealth inequality.  The Occupy Wall Street protesters would like to frame this debate as “socialism vs. capitalism”, but the truth is that wherever you find big government you will almost always find big corporations, and wherever you find big corporations you will almost always find big government.  Sure, they spar once in a while, but the reality is that big government and big corporations work in tandem most of the time.  Sometimes big government has the upper hand and sometimes big corporations have the upper hand, but they are both collectivist institutions.  Wherever you find collectivism in the world, you will find an elite that receives most of the benefits while the rest of the population suffers.  In the United States today, our gigantic government is thriving and our gigantic corporations are thriving and the middle class is rapidly shrinking.  The solution to this is not to replace one form of collectivism with another form of collectivism.  Rather, what we need is to go back to what our founding fathers intended.  They were extremely suspicious of large concentrations of wealth and power, and they intended for us to live in a capitalist system where individuals and small businesses had the freedom to compete and thrive. (Read More...)

What Have We Gotten For The Trillion Dollars We Have Spent On Wars In Afghanistan, Iraq And Libya?

Over a trillion U.S. taxpayer dollars have been spent on wars in Afghanistan, Iraq and Libya.  Whether you are for the wars or against the wars, it is important for all of us to step back and evaluate what we have really gotten for all of that money.  In Libya, we have actually helped al-Qaeda forces that were shooting at U.S. soldiers in Iraq and Afghanistan take over the country.  Now they have announced that they will be imposing strict Sharia law on all of Libya.  After 10 years of having our boys shot up in Afghanistan, the Afghan government is so “grateful” that they are publicly saying that they will side with Pakistan in any future war against the United States.  In Iraq, Islamic radicals are beheading and murdering dozens and dozens of Christians and the new Iraqi government seemingly can’t wait to push the remaining U.S. soldiers out of the country.  We ran up well over a trillion dollars of new debt to “liberate” these countries, but are they really in better shape than they were before these wars?  Are we really in better shape than we were before these wars? (Read More...)

Underemployed And Hating Life

Today, millions of smart, hard working Americans are flipping burgers, waiting tables or working dead end retail jobs not because they want to, but because they have no other options.  According to the U.S. Bureau of Labor Statistics, about 14 million Americans are currently unemployed and another 9.3 million Americans are currently “underemployed”.  During this economic downturn, a lot of Americans have been forced to take part-time jobs because they have been unable to find full-time jobs.  For many, this can be a soul-crushing experience.  It can be easy to become very bitter when you have worked very hard all your life and yet you find yourself having to take a job that only pays you a fraction of what you used to make.  A lot of young college graduates end up hating life because the only jobs that they can seem to find do not even require a college degree and don’t even come close to enabling them to keep up with their crippling student loan debt payments.  Sadly, the underemployment problem continues to grow even worse.  In September alone, the number of underemployed Americans rose by close to half a million. (Read More...)

The Coming Derivatives Crisis That Could Destroy The Entire Global Financial System

Most people have no idea that Wall Street has become a gigantic financial casino.  The big Wall Street banks are making tens of billions of dollars a year in the derivatives market, and nobody in the financial community wants the party to end.  The word “derivatives” sounds complicated and technical, but understanding them is really not that hard.  A derivative is essentially a fancy way of saying that a bet has been made.  Originally, these bets were designed to hedge risk, but today the derivatives market has mushroomed into a mountain of speculation unlike anything the world has ever seen before.  Estimates of the notional value of the worldwide derivatives market go from $600 trillion all the way up to $1.5 quadrillion.  Keep in mind that the GDP of the entire world is only somewhere in the neighborhood of $65 trillion.  The danger to the global financial system posed by derivatives is so great that Warren Buffet once called them “financial weapons of mass destruction”.  For now, the financial powers that be are trying to keep the casino rolling, but it is inevitable that at some point this entire mess is going to come crashing down.  When it does, we are going to be facing a derivatives crisis that really could destroy the entire global financial system. (Read More...)