18 Indications That Europe Has Become An Economic Black Hole Which Is Going To Suck The Life Out Of The Global Economy

Summer vacation is over and things are about to get very interesting in Europe.  Most Americans don’t realize this, but much of Europe shuts down for the entire month of August.  I wish we had something similar in the United States.  But now millions of Europeans are returning from their extended family vacations and the fun is about to begin.  During August economic conditions continued to degenerate in Europe, but I figured that it wouldn’t be until after August that the European debt crisis would take center stage once again.  And as I wrote about last week, if there is going to be a financial panic, it typically happens in the fall.  The stock market has seen quite a nice rally over the summer, and many investors are nervous that we could see a significant “correction” very soon.  The month of September has been the absolute worst month for stock performance over the past 50 years, and it has also been the absolute worst month for stock performance over the past 100 years as well.  Of course that does not guarantee that anything is going to happen this year.  But things in Europe continue to get worse.  Unemployment rates are spiking, manufacturing activity is slowing down, housing prices are crashing and major financial institutions are failing.  What is happening in Europe right now appears to be an even worse version of what happened to the United States back in 2008.

But most Americans aren’t too concerned about what is happening in Europe.

In fact, most Americans don’t believe that a European financial collapse would be much of a problem for us.

Well, just remember what happened back in 2008. When the U.S. financial system started coming apart at the seams it sparked a devastating worldwide recession which was felt in every corner of the globe.

If the European financial system implodes, the consequences could be even worse.

Why?

Europe has a larger population than the United States does.

Europe has a larger economy than the United States does.

Europe has a much, much larger banking system than the United States does.

If Europe experiences a financial collapse, the entire globe will feel the pain.

And considering how weak the U.S. economy already is, it would not take much to push us over the edge.

What is going on in Europe right now is a very, very big deal and people need to pay attention.

The following are 18 indications that Europe has become an economic black hole which is going to suck the life out of the global economy….

#1 The unemployment rate in France is up to 10 percent, and the French media is buzzing about the fact that the number of unemployed French workers has now hit the 3 million mark.

#2 The French government has just announced the nationalization of its second largest mortgage lender.  Additional bailouts are likely on the way.

#3 French automaker PSA Peugeot Citroen has announced that it will be cutting more than 10,000 jobs.  But of course major layoff announcements like this are coming out of Europe almost every day now.

#4 Home prices in France are falling rapidly and the recent election of a socialist president has created a bit of a panic in the French housing market….

British people with homes in France were today warned that the property market is in ‘free fall’.

A combination of factors including the election of a tax-and-spend Socialist government means that prices are tumbling.

It means an end to the boom years, when thousands of Britons poured money into rental or retirement investments across the Channel.

#5 A slow-motion bank run is happening in Spain.  The amount of money being pulled out of the Spanish banking system is absolutely unprecedented.  The following is from a recent Zero Hedge article….

The central bank of Spain just released the net capital outflow numbers and they are disastrous. During the month of June alone $70.90 billion left the Spanish banks and in July it was worse at $92.88 billion which is 4.7% of total bank deposits in Spain. For the first seven months of the year the outflow adds up to $368.80 billion or 17.7% of the total bank deposits of Spain and the trajectory of the outflow is increasing dramatically. Reality is reality and Spain is experiencing a full-fledged run on its banks whether anyone in Europe wants to admit it or not.

If this pace keeps up, more than 600 billion dollars will be pulled out of Spanish banks by the end of the year.

Keep in mind that the GDP of Spain for all of 2011 was just 1.49 trillion dollars.

So by the end of this year we could see the equivalent of more than 40 percent of Spanish GDP pulled out of Spanish banks and sent out of the country.

In case you were wondering, yes, that is a nightmare scenario.

#6 The unemployment rate in Spain is over 25 percent.  The youth unemployment rate in Spain is well over 50 percent.  Spain is a tinderbox that could be set ablaze at any moment.

#7 The yield on 10 year Spanish bonds is up to 6.85 percent.  This is an unsustainable level, and if rates don’t come down on Spanish debt soon it is inevitable that Spain will end up just like Greece.

#8 On Monday it was announced that Spanish banking giant Bankia will be getting an emergency “cash injection” of between 4 and 5 billion euros.  Apparently “cash injection” sounds better to the politicians than “a bailout” does.

#9 The housing crash in Spain just continues to get worse.  It is being reported that some homes in Spain are being sold at a 70% discount from where they were at the peak of the market back in 2006.  At this point there are approximately 2 million unsold homes in Spain.

#10 There are persistent rumors that the government of Spain will soon be forced to officially ask for a bailout from the rest of Europe.  But who is going to bail them out?  Most of the other governments of the eurozone are on the verge of bankruptcy themselves.

#11 Manufacturing activity in Europe has contracted for 13 months in a row.  The following is from a recent Reuters report….

The downturn that began in the smaller periphery members of the 17-nation bloc is now sweeping through Germany and France and the situation remained dire in the region’s third and fourth biggest economies of Italy and Spain.

“Larger nations like France and Germany remain in reverse gear… the (manufacturing) sector is on course to act as a drag on gross domestic product in the third quarter,” said Rob Dobson, senior economist at data collator Markit.

Markit’s final Purchasing Managers’ Index (PMI) for the manufacturing sector fell from an earlier flash reading of 45.3 to 45.1, above July’s three-year low of 44.0, but notching its 13th month below the 50 mark separating growth from contraction.

#12 Chinese exports to the EU declined by 16.2 percent in July.  U.S. exports to Europe have been steadily falling as well.

#13 Slovenia and Cyprus are two other eurozone members that are in desperate need of bailout money.  The dominoes just keep falling and nobody seems to be able to come up with a plan to “fix” Europe.

#14 Even the “strong” economies in Europe are being dragged down now.  For example, unemployment in Germany has risen for five months in a row.

#15 According to one recent poll, only about one-fourth of all Germans want Greece to remain a part of the eurozone.  The odds of a breakup of the euro seem to rise with each passing day.

#16 It is now estimated that bad loans make up approximately 20 percent of all domestic loans in the Greek banking system at this point.

#17 The suicide rate in Greece is more than 30 percent higher than it was last year.  People are becoming very desperate in Greece and there is no end in sight to the economic depression that they are going through.

#18 Large U.S. companies have been rapidly getting prepared for a Greek exit from the eurozone.  The following is from a recent New York Times article….

Even as Greece desperately tries to avoid defaulting on its debt, American companies are preparing for what was once unthinkable: that Greece could soon be forced to leave the euro zone.

Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. Ford has configured its computer systems so they will be able to immediately handle a new Greek currency.

Every time European leaders get together they declare that they have “a plan” that will solve the problems that Europe is experiencing, but as we have seen things in Europe just continue to get worse with no end in sight.

A key date is coming up in the middle of this month.  On September 12th, Germany’s Constitutional Court will determine the fate of the recent fiscal pact and the ESM.  According to UniCredit global chief economist Erik Nielsen, if the court rules against the fiscal pact and the ESM the fallout will be catastrophic….

“If they were to surprise us by striking down Germany’s participation, I would think it’d be an utter bloodbath in markets”

But that is not the only thing that could set off a full-blown panic in the financial markets.

The truth is that Europe is teetering on the edge.

One wrong move and it is going to be 1929 all over again.

As I have maintained all along, the next wave of the economic collapse is rapidly approaching, and this time the epicenter for the crisis is going to be in Europe.

But that does not mean that things are going to be easier for the United States than last time.  We have never even come close to recovering from the last recession.  Most Americans families are just barely getting by.  In fact, 77 percent of them are living paycheck to paycheck at least part of the time.

Right now there are millions of Americans that have lost their jobs and their homes in recent years and that feel forsaken by society.

After this next wave hits us there will be tens of millions of Americans feeling the pain of economic desperation.

The last wave of the economic collapse hurt us.

This next wave is going to absolutely devastate us.

Watch what is happening in Europe very carefully.  What Greece, Spain, Italy and France are experiencing right now is going to hit us soon enough.

8 Economic Threats That We Were Not Even Talking About At The Beginning Of The Summer

In the crazy times in which we live, it helps to expect the unexpected.  Sometimes you can think that you have it all figured out and then this world can throw a real curveball at you. Very few people anticipated that we would see a massive outbreak of the West Nile Virus in Texas this year or that the Mississippi River would be in danger of drying up after experiencing historic flooding last year.  Who would have thought that we would see the worst drought in more than 50 years or that horrific wildfires would burn nearly 7 million acres of land?  This is why economic conditions are always so hard to predict.  A single “black swan event” can come along and change everything almost overnight.  Our world has become incredibly unstable, and so who really knows what the rest of 2012 will bring?  Will we see a stock market crash?  Will the hurricane season be unusually bad?  Will war erupt in the Middle East?  Will we see a major earthquake on the west coast or even a volcanic eruption?  Will the upcoming election cause an eruption of anger and frustration in America?  We don’t know the answers to those questions yet, and the truth is that we will probably see some things happen that very few of us are anticipating at this point.

This is an exciting time to be a “news junkie”, but unfortunately the vast majority of the news these days is bad.

It is almost as if a “perfect storm” is developing.  Our weather is going crazy, our financial system is on the verge of collapse, our politicians seem more insane than ever, there is evidence of social decay all around us and the drumbeats of war in the Middle East grow louder with each passing day.

As strange as 2012 has been so far, I fear that things are about to get a whole lot stranger.

Not that we haven’t had some very unanticipated events happen this year up to this point.

The following are 8 economic threats that we were not even talking about at the beginning of the summer….

#1 West Nile Virus

What is up with all of the strange disease outbreaks that we have seen so far this year?

Flesh eating disease and the bird flu have both been making global headlines this summer, but in the U.S. right now it is the West Nile Virus that is getting the most attention.

So far more than 1,100 cases of the West Nile Virus have been diagnosed in the United States and more than 41 people have died from it.

More than half of the cases so far have been in Texas, but we have also seen people come down with West Nile Virus in Mississippi, Louisiana, South Dakota, and Oklahoma.

If you live in any of those areas, you might want to do your best to avoid mosquitos for the rest of the summer.

#2 Historic Drought

This summer, the United States has experienced the worst drought that it has seen in more than 50 years.

This weather has been absolutely crippling for farmers and ranchers all over the nation.  As I wrote about the other day, about half of all corn being grown in the U.S. is currently either in “poor” or “very poor” condition.

As the drought has dragged on, many farmers and ranchers have become increasingly desperate.  In fact, one farmer has even been feeding his cows candy in an attempt to deal with rising feed prices.

Needless to say, this drought has been causing commodity prices to soar.

On Tuesday, the price of corn closed at a record $8.38 a bushel, and the price of soybeans closed at $17.30 a bushel.

#3 The Mississippi River Is Drying Up

Thanks to this drought, rivers and lakes all over the United States are drying up.  In fact, there have been reports that millions of fish have been dying because water levels have gotten so low in many areas.

Even the mighty Mississippi River has dropped to dangerously low levels.

At this point, the Mississippi is lower than most people living along the river can ever remember.  If it drops much lower, it could potentially have an absolutely devastating impact on the U.S. economy.

A recent NBC News report described what is at stake….

About $180 billion worth of goods move up and down the river on barges, 500 million tons of the basic ingredients for much of the U.S. economy, according to the American Waterways Operators, a trade group. It carries 60 percent of the nation’s grain, 22 percent of the oil and gas and 20 percent of the coal, according to American Waterways Operators. It would take 60 trailer trucks to carry the cargo in just one barge, 144 18-wheeler tankers to carry the oil and gas in one petroleum barge.

If all traffic along the Mississippi was forced to stop, it is estimated that it would cost the U.S. economy about 300 million dollars a day.

And already there have been stoppages along one 11 mile stretch of the river….

Nearly 100 boats and barges were waiting for passage Monday along an 11-mile stretch of the Mississippi River that has been closed because of low water levels, the U.S. Coast Guard said. New Orleans-based Coast Guard spokesman Ryan Tippets said the stretch of river near Greenville, Miss., has been closed intermittently since Aug. 11, when a vessel ran aground.

So what happens if the Mississippi gets even lower?

#4 Wildfires

The extreme heat has also been responsible for the horrific outbreak of wildfires that we have seen in the western United States this year.

So far in 2012, nearly 7 million acres have been burned up.

That is an area about as big as the states of Maryland and Delaware combined.

#5 The Global Elite Hoarding Gold

In the past, the global elite and the mainstream media would mock those who are hoarding gold in anticipation of a major financial collapse.

But now it is the global elite who are hoarding gold.

In a previous article, I discussed how men such as George Soros and John Paulson are investing mind-boggling amounts of money in gold right now.  The amount of money that these two individuals are investing in gold is difficult to comprehend….

There was also news last week in an SEC filing that both George Soros and John Paulson had increased their investment in SPDR Gold Trust, the world’s largest publicly traded physical gold exchange traded fund (ETF).

Mr Soros upped his stake in the ETF to 884,400 shares from 319,550 and Mr Paulson bought 4.53m shares, bringing his stake to 21.3m.

At the current price of about $156 a share, these are new investments of about $88m of Mr Soros’ cash and more than $700m from Mr Paulson’s funds. These are significant positions.

Combined, Soros and Paulson dumped more than three quarters of a billion dollars into gold during the second quarter of 2012 alone.

So what are they anticipating?

The central banks of the world have been very busy hoarding gold as well.  According to the World Gold Council, global central banks were net buyers of 157.5 metric tons of gold during the second quarter of 2012.

Over the past 20 years there has never been a time when global central banks have accumulated that much gold during a single quarter.

So just what in the world is going on?

#6 Recession In The UK

Everyone knew that Greece was in deep trouble.

And everyone knew that Italy and Spain were in deep trouble.

But it was a surprise to see the UK economy plunge deep into recession.  During the second quarter of 2012 alone, the UK economy shrunk by 0.7 percent.

At this point the British economy has contracted for three quarters in a row.

Hopefully things will not get even worse over there.

#7 Major Economic Slowdown In The United States

Considering the fact that the U.S. economy never even came close to recovering from the last recession, it is a bit disheartening to see that it looks like we are headed for another major downturn.

According to Michael Panzer of Financial Armageddon, measurements of economic activity compiled by the Federal Reserve Bank of Philadelphia indicate that the U.S. economy is rapidly heading into another recession.  If you doubt this, just check out this chart.

And for a lot more reasons why the U.S. economy is entering another recession, check out this article.

#8 Hauled Off To A Mental Institution For What You Believe

Do you ever worry that what you post on Facebook could get you involuntarily committed to a mental institution?

Well, that is exactly what happened to one military vet recently.

A former Marine named Brandon Raub was hauled off to a mental institution because of what he posted on his Facebook page.

This is how the Economic Policy Journal summarized what happened to Raub….

The muscle used to grab Brandon Raub was local Chesterfield County, VA police. Also present during the grab were agents of the FBI and of the Secret Service.

Both the FBI and the Secret Service claim that they were only observing and not participating in the grab. The Chesterfield County police initially stated that they were only carrying out a request from the federal agencies.

The police also claim Raub is not under arrest, even though he was led away in handcuffs and is not permitted to leave the psychiatric ward of a hospital—even though it appears that Raub is not in  any way in need of psychological care.

I note this happened in the United States of America, with local police, FBI agents and Secret Service taking part.

The claim that Raub is “not under arrest” is completely and totally ridiculous.  The authorities came to his door, slapped handcuffs on him and are holding him in a mental institution against his will.

And now he has been transferred to a facility that is 3 hours away from his family, his supporters and his legal team.

What in the world is America turning into?

The Rutherford Institute is defending Raub, and the following is an excerpt from a statement about this case on their website….

“This is not how justice in America is supposed to work—with Americans being arrested for doing nothing more than exercising their First Amendment rights, forced to undergo psychological evaluations, detained against their will and isolated from their family, friends and attorneys. This is a scary new chapter in our history,” said John W. Whitehead, president of The Rutherford Institute. “Brandon Raub is no different from the majority of Americans who use their private Facebook pages to post a variety of content, ranging from song lyrics and political hyperbole to trash talking their neighbors, friends and government leaders.”

This is the kind of thing that we have seen under brutal totalitarian regimes in the past.  Dissidents are grabbed by authorities and taken to mental institutions where they are conveniently “disappeared”.

This kind of thing is not supposed to happen in America.

But it is happening.

And you know what?  Before the authorities start attacking people for exercising free speech on Facebook perhaps they should clean up their own house.

It turns out that thousands of DHS employees have been convicted of crimes in recent years.  The following is from a recent CNS News article….

There have been 2,527 Department of Homeland Security (DHS) employees and co-conspirators convicted of corruption and other criminal misconduct since 2004, according to a federal auditor.

Our world is becoming a very crazy place.

One thing that most people did see coming this summer was the continuing economic decline in Greece.

At this point Greece is experiencing a full-blown economic depression and it gets worse by the day.

If you can believe it, 1,250 companies have shut down in the second largest city in Greece in 2012 alone.

Ouch.

And many in the financial world believe the the situation in Greece is going to go beyond the breaking point fairly soon.

In fact, analysts at Citibank believe that there is a 90 percent chance that Greece will leave the euro over the next 12 to 18 months.

90 percent?

They sound pretty sure of themselves.

Not that the rest of Europe is in such great shape either.

According to Bloomberg, it looks like Europe will soon be losing about half a million auto industry jobs….

Efforts by PSA Peugeot Citroen (UG) and Fiat SpA (F) to end losses in Europe could cost more than 500,000 people their jobs as automakers and parts suppliers grapple with the effects of the European sovereign debt crisis.

We live in very unusual times.

Things are falling apart all around us and we seem to be rapidly approaching another major economic crisis.

Central banks, governments and Wall Street insiders all seem to be preparing for the worst.

Are you?

Are The Government And The Big Banks Quietly Preparing For An Imminent Financial Collapse?

Something really strange appears to be happening.  All over the globe, governments and big banks are acting as if they are anticipating an imminent financial collapse.  Unfortunately, we are not privy to the quiet conversations that are taking place in corporate boardrooms and in the halls of power in places such as Washington D.C. and London, so all we can do is try to make sense of all the clues that are all around us.  Of course it is completely possible to misinterpret these clues, but sticking our heads in the sand is not going to do any good either.  Last week, it was revealed that the U.S. government has been secretly directing five of the biggest banks in America “to develop plans for staving off collapse” for the last two years.  By itself, that wouldn’t be that big of a deal.  But when you add that piece to the dozens of other clues of imminent financial collapse, a very troubling picture begins to emerge.  Over the past 12 months, hundreds of banking executives have been resigning, corporate insiders have been selling off enormous amounts of stock, and I have been personally told that a significant number of Wall Street bankers have been shopping for “prepper properties” in rural communities this summer.  Meanwhile, there have been reports that the U.S. government has been stockpiling food and ammunition, and Barack Obama has been signing a whole bunch of executive orders that would potentially be implemented in the event of a major meltdown of society.  So what does all of this mean?  It could mean something or it could mean nothing.  What we do know is that a financial collapse is coming at some point.  Over the past 40 years, the total amount of all debt in the United States has grown from about 2 trillion dollars to nearly 55 trillion dollars.  That is a recipe for financial armageddon, and it is inevitable that this gigantic bubble of debt is going to burst at some point.

In normal times, the U.S. government does not tell major banks to “develop plans for staving off collapse”.

But according to a recent Reuters article, that is apparently exactly what has been happening….

U.S. regulators directed five of the country’s biggest banks, including Bank of America Corp and Goldman Sachs Group Inc, to develop plans for staving off collapse if they faced serious problems, emphasizing that the banks could not count on government help.

The two-year-old program, which has been largely secret until now, is in addition to the “living wills” the banks crafted to help regulators dismantle them if they actually do fail. It shows how hard regulators are working to ensure that banks have plans for worst-case scenarios and can act rationally in times of distress.

Does it seem odd to anyone else that only five really big banks got such a warning?

And why keep it secret from the American public?

Does the federal government actually expect such a collapse to happen?

If federal officials do expect a financial collapse to occur, they would not be the only ones.  An increasing number of very respected economists are speaking about the coming financial collapse as if there is a certain inevitability about it.

For example, check out the following quote from a recent Money Morning article….

Richard Duncan, formerly of the World Bank and chief economist at Blackhorse Asset Mgmt., says America’s $16 trillion federal debt has escalated into a “death spiral,” as he told CNBC.

And it could result in a depression so severe that he doesn’t “think our civilization could survive it.”

A former World Bank executive is warning that our civilization might not survive what is coming?

That is pretty chilling.

Economist Nouriel Roubini says that he believes that the coming crisis will be even worse than 2008….

“Worse because like 2008 you will have an economic and financial crisis but unlike 2008, you are running out of policy bullets. In 2008, you could cut rates; do QE1, QE2; you could do fiscal stimulus; you could backstop/ringfence/guarantee banks and everybody else. Today, more QEs are becoming less and less effective because the problems are of solvency not liquidity. Fiscal deficits are already so large and you cannot bail out the banks because 1) there is a political opposition to it; and 2) governments are near-insolvent – they cannot bailout themselves let alone their banks. The problem is that we are running out of policy rabbits to pull out of the hat!”

Across the pond, many European officials are echoing similar sentiments.

What Nigel Farage told King World News the other day is very ominous….

Today MEP (Member European Parliament) Nigel Farage spoke with King World News about what he described as the possibility of, “a really dramatic banking collapse.”  Farage also warned that central planners want to enslave and imprison people inside of a ‘New Order,’ and he described the situation as “horrifying.”

The situation in Europe continues to get worse and worse.  The authorities in Europe have come out with “solution” after “solution”, and yet unemployment continues to skyrocket and economic conditions in the EU have deteriorated very steadily over the past 12 months.

If all of that was not bad enough, there are an increasing number of indications that Germany is actually considering leaving the euro.

Needless to say, that would be a complete and total disaster for the rest of the eurozone.

Of course there are any number of ways that the financial crisis in Europe could potentially play out.

But all of the realistic scenarios would be very bad for the global economy.

Meanwhile, our resources are dwindling, war in the Middle East could erupt at any moment and our planet is becoming increasingly unstable.  The following is from a recent article by Paul B. Farrell on Marketwatch.com….

Fasten your seat belts, soon we’ll all be shocked out of denial. Some unpredictable black swan. A global wake-up call will trigger the Pentagon’s prediction in Fortune a decade ago at the launch of the Iraq War: “By 2020 … an ancient pattern of desperate, all-out wars over food, water, and energy supplies is emerging … warfare defining human life.”

It is almost as if a “perfect storm” is brewing.

Of course the historic drought that is ravaging food production in the United States this summer is not helping matters either.  Another summer or two like this one and we could be looking at a return of Dust Bowl conditions.

Anyone that is watching what is going on in the world and is not concerned at all about what is happening is simply being delusional.

Recently, a “team of scientists, economists, and geopolitical analysts” examined the current state of the global economic system and the conclusions they reached were absolutely staggering….

One member of this team, Chris Martenson, a pathologist and former VP of a Fortune 300 company, explains their findings:

“We found an identical pattern in our debt, total credit market, and money supply that guarantees they’re going to fail. This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible.

“And what’s really disturbing about these findings is that the pattern isn’t limited to our economy. We found the same catastrophic pattern in our energy, food, and water systems as well.”

According to Martenson: “These systems could all implode at the same time. Food, water, energy, money. Everything.”

Hmmmm – it sounds like they have been reading The Economic Collapse Blog.

The truth is that a massive worldwide financial collapse is coming.

It is inevitable, and it is going to be extremely painful.

So what do you think about all of this?  Please feel free to post a comment with your thoughts below….

The Economic Collapse