Federal Reserve Money Printing Is The Real Reason Why The Stock Market Is Soaring

Federal Reserve Money Printing Is The Real Reason Why The Stock Market Is SoaringYou can thank the reckless money printing that the Federal Reserve has been doing for the incredible bull market that we have seen in recent months.  When the Federal Reserve does more “quantitative easing”, it is the financial markets that benefit the most.  The Dow and the S&P 500 have both hit levels not seen since 2007 this month, and many analysts are projecting that 2013 will be a banner year for stocks.  But is a rising stock market really a sign that the overall economy is rapidly improving as many are suggesting?  Of course not.  Just because the Federal Reserve has inflated another false stock market bubble with a bunch of funny money does not mean that the U.S. economy is in great shape.  In fact, the truth is that things just keep getting worse for average Americans.  The percentage of working age Americans with a job has fallen from 60.6% to 58.6% while Barack Obama has been president, 40 percent of all American workers are making $20,000 a year or less, median household income has declined for four years in a row, and poverty in the United States is absolutely exploding.  So quantitative easing has definitely not made things better for the middle class.  But all of the money printing that the Fed has been doing has worked out wonderfully for Wall Street.  Profits are soaring at Goldman Sachs and luxury estates in the Hamptons are selling briskly.  Unfortunately, this is how things work in America these days.  Our “leaders” seem far more concerned with the welfare of Wall Street than they do about the welfare of the American people.  When things get rocky, their first priority always seems to be to do whatever it takes to pump up the financial markets.

When QE3 was announced, it was heralded as the grand solution to all of our economic problems.  But the truth is that those running things knew exactly what it would do.  Quantitative easing always pumps up the financial markets, and that overwhelmingly benefits those that are wealthy.  In fact, a while back a CNBC article discussed a very interesting study from the Bank of England which showed a clear correlation between quantitative easing and rising stock prices…

It said that the Bank of England’s policies of quantitative easing – similar to the Fed’s – had benefited mainly the wealthy.

Specifically, it said that its QE program had boosted the value of stocks and bonds by 26 percent, or about $970 billion. It said that about 40 percent of those gains went to the richest 5 percent of British households.

Many said the BOE’s easing added to social anger and unrest. Dhaval Joshi, of BCA Research wrote that  “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it.”

So should we be surprised that stocks are now the highest that they have been in more than 5 years?

Of course not.

And who benefits from this?

The wealthy do.  In fact, 82 percent of all individually held stocks are owned by the wealthiest 5 percent of all Americans.

Unfortunately, all of this reckless money printing has a very negative impact on all the rest of us.  When the Fed floods the financial system with money, that causes inflation.  That means that the cost of living has gone up even though your paycheck may not have.

If you go to the supermarket frequently, you know exactly what I am talking about.  The new “sale prices” are what the old “regular prices” used to be.  They keep shrinking many of the package sizes in order to try to hide the inflation, but I don’t think many people are fooled.  Our food dollars are not stretching nearly as far as they used to, and we can blame the Federal Reserve for that.

For much more on rising prices in America, please see this article: “Somebody Should Start The ‘Stuff Costs Too Much’ Party“.

Sadly, this is what the Federal Reserve does.  The system was designed to create inflation.  Before the Federal Reserve came into existence, the United States never had an ongoing problem with inflation.  But since the Fed was created, the United States has endured constant inflation.  In fact, we have come to accept it as “normal”.  Just check out the amazing chart in the video posted below

The chart in that video kind of reminds me of a chart that I shared in a previous article

Hyperinflation Weimar Republic

Not that I expect the United States to enter a period of hyperinflation in the near future.

Actually, despite all of the reckless money printing that the Fed has been doing, I expect that at some point we are going to see another wave of panic hit the financial markets like we saw back in 2008.  The false stock market bubble will burst, major banks will fail and the financial system will implode.  It could unfold something like this…

1 – A derivatives panic hits the “too big to fail” banks.

2 – Financial markets all over the globe crash.

3 – The credit markets freeze up.

4 – Economic activity in the United States starts to grind to a halt.

5 – Unemployment rises above 20 percent and mortgage defaults soar to unprecedented levels.

6 – Tax revenues fall dramatically and austerity measures are implemented by the federal government, state governments and local governments.

7 – The rest of the globe rapidly loses confidence in the U.S. financial system and begins to dump U.S. debt and U.S. dollars.

I write about derivatives a lot, because they are one of the greatest threats that the global financial system is facing.  In fact, right now a derivatives scandal is threatening to take down the oldest bank in the world

Banca Monte dei Paschi di Siena, the world’s oldest bank, was making loans when Michelangelo and Leonardo da Vinci were young men and before Columbus sailed to the New World. The bank survived the Italian War, which saw Siena’s surrender to Spain in 1555, the Napoleonic campaign, the Second World War and assorted bouts of plague and poverty.

But MPS may not survive the twin threats of a gruesomely expensive takeover gone bad and a derivatives scandal that may result in legal action against the bank’s former executives. After five centuries of independence, MPS may have to be nationalized as its losses soar and its value sinks.

So when you hear the word “derivatives” in the news, pay close attention.  The bankers have turned our financial system into a giant casino, and at some point the entire house of cards is going to come crashing down.

In response to the coming financial crisis, I believe that our “leaders” will eventually resort to money printing unlike anything we have ever seen before in a desperate attempt to resuscitate the system.  When that happens, I believe that we will see the kind of rampant inflation that so many people have been warning about.

So what do you think about all of this?

Do you believe that Federal Reserve money printing is the real reason why the stock market is soaring?

Please feel free to post a comment with your thoughts below…

How Much Money Will They Print?

34 Signs That America Is In Decline

The United States is clearly in an advanced state of decline.  Many people around the world (and even inside America) rejoice at this, but not me.  I mourn for the country that I was born in and that I still love.  Yes, the United States has never been perfect, but the Republic that our Founding Fathers started truly has been a light to the rest of the world in a lot of ways over the centuries.  Unfortunately, our foundations are badly rotting and our nation is collapsing all around us.  Many Americans like to think that the United States is greater today than it has ever been before, but the truth is that America is like a patient that has stage 4 cancer that has spread to almost every area of the body.  Our nation is being destroyed in thousands of different ways, and more distressing news emerges with each passing day.  This article will mainly focus on the economic decline of America, but much could also be said about our social, political, moral and spiritual decline as well.  We are simply not the same country that we used to be.  Americans are proud, selfish, greedy, arrogant, ungrateful, treacherous and completely addicted to entertainment and pleasure.  Our country is literally falling apart all around us, but most Americans are so plugged into entertainment that they can’t even be bothered to notice what is happening.  Most Americans seem to assume that we will always have endless prosperity just because of who we are, but unfortunately that simply is not true.  We inherited the greatest economic machine the world has ever seen and we have wrecked it, and now a very painful day of reckoning is approaching.  But most people will not understand until it is too late.

The following are 34 signs that America is in decline…

#1 According to the World Bank, U.S. GDP accounted for 31.8 percent of all global economic activity in 2001.  That number dropped to 21.6 percent in 2011.  That is not just a decline – that is a freefall.  Just check out the chart in this article.

#2 According to The Economist, the United States was the best place in the world to be born into back in 1988.  Today, the United States is only tied for 16th place.

#3 The United States has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.

#4 According to the Wall Street Journal, of the 40 biggest publicly traded corporate spenders, half of them plan to reduce capital expenditures in coming months.

#5 More than three times as many new homes were sold in the United States in 2005 as will be sold in 2012.

#6 America once had the greatest manufacturing cities on the face of the earth.  Now many of our formerly great manufacturing cities have degenerated into festering hellholes.  For example, the city of Detroit is on the verge of financial collapse, and one state lawmaker is now saying that “dissolving Detroit” should be looked at as an option.

#7 In 2007, the unemployment rate for the 20 to 29 age bracket was about 6.5 percent.  Today, the unemployment rate for that same age group is about 13 percent.

#8 Back in 1950, more than 80 percent of all men in the United States had jobs.  Today, less than 65 percent of all men in the United States have jobs.

#9 If you can believe it, approximately one out of every four American workers makes 10 dollars an hour or less.

#10 Sadly, 60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.

#11 Median household income in America has fallen for four consecutive years.  Overall, it has declined by over $4000 during that time span.

#12 The U.S. trade deficit with China during 2011 was 28 times larger than it was back in 1990.

#13 Incredibly, more than 56,000 manufacturing facilities in the United States have been shut down since 2001.  During 2010, manufacturing facilities were shutting down at the rate of 23 per day.  How can anyone say that “things are getting better” when our economic infrastructure is being absolutely gutted?

#14 Back in early 2005, the average price of a gallon of gasoline was less than 2 dollars a gallon.  During 2012, the average price of a gallon of gasoline has been $3.63.

#15 In 1999, 64.1 percent of all Americans were covered by employment-based health insurance.  Today, only 55.1 percent are covered by employment-based health insurance.

#16 As I have written about previously, 61 percent of all Americans were “middle income” back in 1971 according to the Pew Research Center.  Today, only 51 percent of all Americans are “middle income”.

#17 There are now 20.2 million Americans that spend more than half of their incomes on housing.  That represents a 46 percent increase from 2001.

#18 According to the U.S. Census Bureau, the poverty rate for children living in the United States is about 22 percent.

#19 Back in 1983, the bottom 95 percent of all income earners in the United States had 62 cents of debt for every dollar that they earned.  By 2007, that figure had soared to $1.48.

#20 Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.

#21 Total credit card debt in the United States is now more than 8 times larger than it was just 30 years ago.

#22 The value of the U.S. dollar has declined by more than 96 percent since the Federal Reserve was first created.

#23 According to one survey, 29 percent of all Americans in the 25 to 34 year old age bracket are still living with their parents.

#24 Back in 1950, 78 percent of all households in the United States contained a married couple.  Today, that number has declined to 48 percent.

#25 According to the U.S. Census Bureau, 49 percent of all Americans live in a home that receives direct monetary benefits from the federal government.  Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.

#26 In 1980, government transfer payments accounted for just 11.7 percent of all income.  Today, government transfer payments account for more than 18 percent of all income.

#27 In November 2008, 30.8 million Americans were on food stamps.  Today, 47.1 million Americans are on food stamps.

#28 Right now, one out of every four American children is on food stamps.

#29 As I wrote about the other day, according to one calculation the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”

#30 Back in 1965, only one out of every 50 Americans was on Medicaid.  Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse.  It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.

#31 In 2001, the U.S. national debt was less than 6 trillion dollars.  Today, it is over 16 trillion dollars and it is increasing by more than 100 million dollars every single hour.

#32 The U.S. national debt is now more than 23 times larger than it was when Jimmy Carter became president.

#33 According to a PBS report from earlier this year, U.S. households that make $13,000 or less per year spend 9 percent of their incomes on lottery tickets.  Could that possibly be accurate?  Are people really that foolish?

#34 As the U.S. economy has declined, the American people have been downing more antidepressants and other prescription drugs than ever before.  In fact, the American people spent 60 billion dollars more on prescription drugs in 2010 than they did in 2005.

So what are our “leaders” doing about all of this?

Not much.

They just continue to insist that everything is “just fine”.

Sadly, the truth is that they live in a world that is very different from most of the rest of us.

Barack Obama is getting ready to take a 20 day vacation to Hawaii.

When was the last time you got to take a 20 day vacation?

And most of our “leaders” have no idea what it is like to struggle from month to month on a paycheck.

Overall, more than half of the members of Congress are millionaires.  We are led by wealthy men who are serving the interests of other wealthy men.

But the problem with our system is not limited to the president and the members of Congress.  The truth is that the political system in America has become a colossal beast that just continues to grow no matter who is in power.  The political establishment of both parties is totally dependent on this beast, and they will continue to feed it and serve it because it has been very good to them.  The following is from an outstanding article by Steve McCann

The Republican and Democratic political establishments are made up of the following: 

1) many current and nearly all retired national office holders whose livelihood and narcissistic demands depends upon fealty to Party and access to government largesse;

2) the majority of the media elite, including pundits, editors, writers and television news personalities based in Washington and New York whose proximity to power and access is vital to their continued standard of living;  

3) academia, numerous think-tanks, so-called non-government organizations, and lobbyists who fasten onto those in the administration and Congress for employment, grants, favorable legislation and ego-gratification;  

4) the reliable deep pocket political contributors and political consultants whose future is irrevocably tied to the political machinery of the Party; and

5) the crony capitalists, i.e. leaders of the corporate and financial community as well as unions whose entities are dependent on or subject to government oversight and/or benevolence .

Do you think that there is any chance that this insidious system will be uprooted any time soon?

Of course not.

We will continue on the same path that we are on right now and America will continue to decline.

Many will rejoice as America falls, but I will not.

I will mourn for a mighty Republic that has fallen and for a dream that has been lost.

The Largest Economy In The World Is Imploding Right In Front Of Our Eyes

A devastating economic depression is rapidly spreading across the largest economy in the world.  Unemployment is skyrocketing, money is being pulled out of the banks at an astounding rate, bad debts are everywhere and economic activity is slowing down month after month.  So who am I talking about?  Not the United States – the economy that I am talking about has a GDP that is more than two trillion dollars larger.  It is not China either – the economy that I am talking about is more than twice the size of China.  You have probably guessed it by now – the largest economy in the world is the EU economy.  Things in Europe continue to get even worse.  Greece and Spain are already experiencing full-blown economic depressions that continue to deepen, and Italy and France are headed down the exact same path that Greece and Spain have gone.  Headlines about violent protests and economic despair dominate European newspapers day after day after day.  European leaders hold summit meeting after summit meeting, but all of the “solutions” that get announced never seem to fix anything.  In fact, the largest economy on the planet continues to implode right in front of our eyes, and the economic shockwave from this implosion is going to be felt to the four corners of the earth.

On Friday, newspapers all over Europe declared that Greece is about to run out of money (again).

The Greek government says that without more aid they will completely run out of cash by the end of November.

Of course the rest of Europe is going to continue to pour money into Greece because they know that if they don’t the financial markets will panic.

But they are also demanding that Greece make even more painful budget cuts.  Previous rounds of budget cuts have been extremely damaging to the Greek economy.

The Greek economy contracted by 4.9 percent during 2010 and by 7.1 percent during 2011.

Overall, the Greek economy has contracted by about 20 percent since 2008.

This is what happens when you live way above your means for too long and a day of reckoning comes.

The adjustment can be immensely painful.

Greece continues to implement wave after wave of austerity measures, and these austerity measures have pushed the country into a very deep depression, but Greece still is not even close to a balanced budget.

Greece is still spending more money than it is bringing in, and Greek politicians are warning what even more budget cuts could mean for their society.

For example, what Greek Prime Minister Antonis Samaras had to say the other day was absolutely chilling….

“Greek democracy stands before what is perhaps its greatest challenge,” Samaras told the German business daily Handelsblatt in an interview published hours before the announcement in Berlin that Angela Merkel will fly to Athens next week for the first time since the outbreak of the crisis.

Resorting to highly unusual language for a man who weighs his words carefully, the 61-year-old politician evoked the rise of the neo-Nazi Golden Dawn party to highlight the threat that Greece faces, explaining that society “is threatened by growing unemployment, as happened to Germany at the end of the Weimar Republic”.

“Citizens know that this government is Greece’s last chance,” said Samaras, who has repeatedly appealed for international lenders at the EU and IMF to relax the onerous conditions of the bailout accords propping up the Greek economy.

But don’t look down on Greece.  They are just ahead of the curve.  Eventually the U.S. and the rest of Europe will go down the exact same path.

Just look at Spain.  When Greece first started imploding, Spain insisted that the same thing would never happen to them.

But it did.

By itself, Spain is the 12th largest economy in the world, and right now it is a complete and total mess with no hope of recovery in sight.

The national government is broke, the regional governments are broke, the banking system is insolvent and Spain is in the midst of the worst housing crash that it has ever seen.

On top of everything else, the unemployment rate in Spain is now over 25 percent and the unemployment rate for those under the age of 25 is now well above 50 percent.

An astounding 9.86 percent of all loans that Spanish banks are holding are considered to be bad loans which will probably never be collected.  Before it is all said and done, probably ever major Spanish bank will need to be bailed out at least once.

Manufacturing activity in Spain has contracted for 17 months in a row, and the number of corporate bankruptcies in Spain is rising at a stunning rate.

Five different Spanish regions have formally requested bailouts from the national government, and the national government is drowning in an ocean of red ink.

Meanwhile, panic has set in and there has been a run on the banks in Spain.  The following is from a recent Bloomberg article….

Banco Santander SA (SAN), Spain’s largest bank, lost 6.3 percent of its domestic deposits in July, according to data published by the nation’s banking association. Savings at Banco Popular Espanol SA, the sixth-biggest, fell 9.5 percent the same month.

Eurobank Ergasias SA, Greece’s second-largest lender, lost 22 percent of its customer deposits in the 12 months ended March 31, according to the latest data available from the firm. Alpha Bank SA (ALPHA), the country’s third-biggest, lost 26 percent of client savings during that period.

Overall, the equivalent of 7 percent of GDP was withdrawn from the Spanish banking system in the month of July alone.

Thousands of Spaniards have become so desperate that they have resorted to digging around in supermarket trash bins for food.  In response, locks are being put on supermarket trash bins in some areas.

But Greece and Spain are not alone in seeing their economies implode.

As I wrote about recently, the number of unemployed workers in Italy has risen by more than 37 percent over the past year.

The French economy is starting to implode as well.  Just check out this article.

The unemployment rate in France is now above 10 percent, and it has risen for 16 months in a row.

It is just a matter of time before things in Italy and France get as bad as they already are in Greece and Spain.

The chief economist at the IMF is now saying that it will take until at least 2018 for the global economy to recover, but unfortunately I believe that he is being overly optimistic.

As I have said so many times before, the next wave of the global economic crisis is rapidly approaching.  Depression is already sweeping much of southern Europe, and it is only a matter of time before it sweeps across northern Europe and North America as well.

Neither Obama or Romney is going to be able to stop what is coming.  The global economy is getting weaker with each passing day.  The central banks of the world can print money until the cows come home, but that isn’t going to fix our fundamental problems.

The largest economy in the world is imploding right in front of our eyes and nobody seems to know what to do about it.

If you believe that Barack Obama, Mitt Romney or Ben Bernanke can somehow magically shield us from the economic shockwave that is coming then you are being delusional.

Just because what is going on in Europe is a “slow-motion train wreck” does not mean that it will be any less devastating.

Yes, we can see what is coming and we can understand why it is happening, but that doesn’t mean that we will be able to avoid the consequences.

14 Signs That The World Economy Is Getting Weaker

The United States is not the only one with massive economic problems right now.  The truth is that just about wherever you look around the globe things are getting even worse.  China is experiencing a substantial economic slowdown, and Japan has resorted to yet another round of money printing in an effort to keep the Japanese economy moving.  Unemployment in Europe continues to get even worse, and the riots this week in Spain and in Greece have been absolutely frightening at times.  In the United States there are a whole host of signs that another recession is approaching, and the number of American CEOs that say that they plan to eliminate jobs in the coming months is rapidly rising.  The world economy is more interconnected today than ever before, and that means that we are all in this together.  Just remember what happened back in 2008 and 2009.  The economic pain that started on Wall Street was felt in every corner of the planet.  So anyone that believes that the United States (or any other major nation for that matter) is going to escape the next wave of the economic crisis is simply not being realistic.  Why do you think central banks all over the world are in “panic mode” right now?  They are firing all of their ammunition and printing money like there is no tomorrow in an attempt to keep the system together.  Unfortunately, it is not going to work.

If the powers that be had an “easy button” that would quickly fix everything, they would have pressed it by now.  But despite all of their efforts things continue to unravel.  If you want to get an idea of where we are headed,  just look at what is already happening in Europe.   Unemployment has risen above 24 percent in Greece and above 25 percent in Spain.

Those two nations are on the “bleeding edge” of the next wave of economic problems.  Unemployment is rising almost everywhere else in Europe as well, and things are eventually going to get really bad in Asia and in North America too.

So hold on to your seat belts – it is going to be a bumpy ride.

The following are 14 signs from around the globe that the world economy is getting weaker….

#1 Things in China do not look good right now.  The Shanghai Composite index fell to its lowest point in over 3 years earlier this week.  Will the S&P 500 soon follow suit?

#2 The Bank of Japan has resorted to yet another round of money printing in a desperate attempt to try to bolster the faltering Japanese economy….

In Asia, the Bank of Japan has long been manufacturing money out of thin air. It has just announced an eighth round of money printing to prop up the ailing Japanese economy. The Bank of Japan is to purchase 10 trillion yen of bonds to add further liquidity into the financial system. Now it has 80 trillion yen of bonds in its portfolio, equivalent to 20 per cent of Japan’s gross domestic product.

#3 In Spain, violent demonstrations over the state of the Spanish economy just outside the national Parliament building in Madrid on Tuesday evening made headlines all over the globe.  You can view video of police brutally beating young Spanish protesters during those demonstrations right here.

#4 As unemployment hovers around the 25 percent mark, foraging through garbage bins for food has become so rampant in Spain that one city has actually started putting locks on supermarket garbage bins “as a public health precaution“.

#5 Despite all of the money printing that the ECB has been doing, the yield on 10 year Spanish bonds has risen back up to about 6 percent again.

#6 The economic protests in Greece are getting completely and totally out of control.  Just check out this description of the “Day of Rage” that took place in Greece earlier this week….

Police fired stun grenades and tear gas at protesters yesterday as tens of thousands poured into the streets of Athens as part of a nationwide strike to challenge a new round of austerity measures that are expected to cut wages, pensions and healthcare once again.

Dozens of youths, some masking their faces with helmets and T-shirts, hurled Molotov cocktails and rocks at police who fired back in an effort to scatter the angry crowds around the parliament building. More than 50,000 people are believed to have participated in the mass walk-out in Athens alone.

#7 The unemployment rate in France has risen for 16 months in a row and is now the highest that it has been in over a decade.

#8 As I wrote about recently, the number of unemployed workers in Italy has increased by more than 37 percent over the past year.

#9 New orders for durable goods in the United States fell by a whopping 13.2 percent in August.  That was the largest decline that we have seen since the middle of the last recession (January 2009).

#10 According to the Bureau of Economic Analysis, U.S. GDP only grew at a 1.3 percent annual rate during the second quarter of 2012 as opposed to the 1.7 percent annual rate previously reported.

#11 The U.S. Postal Service is about to experience its second financial default in just the past two months….

The U.S. Postal Service will default this week on a $5.6 billion congressionally mandated obligation to pre-fund retiree health benefits, marking the second time in two months the cash-strapped agency has done this.

#12 It looks like General Motors is on a path that will lead to bankruptcy (again).

#13 According to a recent survey conducted by State Street Global Advisors, 71 percent of “investors in a survey of 300 around the world, including the largest pension funds, asset managers and private banks, fear an imminent Lehman-like event.”

#14 According to a recent survey of American CEOs by Business Roundtable, the number of CEOs that plan to eliminate jobs has risen significantly from earlier this year….

The CEOs’ decline in confidence comes alongside a worsening employment outlook. Thirty-four percent of the 138 CEOs surveyed said in this quarter’s survey that they expected their companies to cut jobs in the next six months, compared to just 20 percent in the second quarter. Likewise, only 29 percent say they expect employment to grow in the next half year, down from 36 percent last quarter.

But the mainstream media in the United States would like us to believe that everything is getting better.

The mainstream media would like us to believe that QE3 is going to stimulate lots of new hiring all over America, and they are greatly celebrating the fact that the S&P 500 hit a five year high on Thursday.

Well, those on Wall Street should celebrate this monetary “sugar high” while they still can.  Of course QE3 was going to cause stock prices to rise in the short-term, but the reality of the matter is that QE3 is not going to do a thing to stop the financial markets from crashing when the time comes for them to crash.

Economies tend to flourish in a stable, predictable environment.  When you start recklessly printing money, it may help your economic numbers in the short-term, but it disrupts the stability of the system.

And once you have created a tremendous amount of instability, it is really, really hard to convince people that you can create stability once again.

When it comes to economics, confidence is one of the most important ingredients.  If people lose confidence in the system, it almost does not matter what else you do.

As I wrote about the other day, quantitative easing worked for the Weimar Republic for a little while, but in the end it resulted in total disaster.

It will also end in total disaster for us.

All over the globe financial authorities are playing all sorts of games in an attempt to keep the system functioning smoothly.  But these games are going to steadily undermine confidence in the system, and that is going to prove to be absolutely deadly.

Take advantage of this period of relative stability while you still can, because when it is gone it is not coming back.

12 Signs That Spain Is Shifting Gears From Recession To Depression

Where have we seen this before?  Bond yields soar above the 7 percent danger level.  Check.  The stock market crashes to new lows.  Check.  Industrial activity plummets like a rock and the economy contracts.  Check.  The unemployment rate skyrockets to more than 20 percent.  Check.  The bursting of a massive real estate bubble pushes the banking system to the brink of implosion.  Check.  Broke local governments beg the broke national government for bailouts.  Check.  The international community pressures the national government to implement deep austerity measures which will slow down the economy even more and hordes of violent protesters take to the streets.  Check.  All of this happened in Greece, it is happening right now in Spain, and mark my words it will eventually happen in the United States.  Every debt bubble eventually bursts, and right now Spain is experiencing a level of economic pain that very, very few people saw coming.  The recession in Spain is rapidly becoming a full-blown economic depression, and at this point there is no hope and no light at the end of the tunnel.

The bad news for the global economy is that Spain is much larger than Greece.  According to the United Nations, the Greek economy is the 32nd largest economy in the world.  The Spanish economy, on the other hand, is the 4th largest economy in the eurozone and the 12th largest economy on the entire planet.  It is nearly five times the size of the Greek economy.

Financial markets all over the globe are very nervous right now because if the Spanish government ends up asking for a full-blown bailout it could spell the end for the eurozone.  There simply is not enough money to do the same kind of thing for Spain that is being done for Greece.

Of course European officials are going to do their best to keep the eurozone from collapsing, but what they have completely failed to do is to keep these countries from falling into depression.

As I have written about previously, Greece has already been in an economic depression for some time.

I warned that Spain, Italy, Portugal and a bunch of other European nations were going down the exact same path.

Now we are watching a virtual replay of what happened in Greece take place in Spain.

Unfortunately, the global financial system may not be able to handle a complete implosion of the Spanish economy.

The following are 12 signs that Spain is shifting gears from recession to depression….

#1 At one point on Monday, the IBEX stock market index fell to 5,905, which was the lowest level in nearly ten years.  When it hit 5,905 that represented a drop of about 12 percent over just two trading days.  If that happened in the United States, it would be the equivalent of the Dow falling by about 1500 points in 48 hours.

#2 So far this year, the Spanish stock market is down more than 25 percent.  Back in 2008, the IBEX 35 was well over 15,000.  Today it is sitting just above 6,000.

#3 Spain has banned many forms of short selling for 3 months.

#4 The yield on 10 year Spanish bonds is now well above the 7 percent “danger level”.

#5 Thanks to the problems in Spain, the euro continues to fall like a rock.  On Monday it hit a new two year low against the U.S. dollar, and it is near a twelve year low against the Japanese yen.

#6 During the first quarter of 2012, the Spanish economy contracted by 0.3 percent.  During the second quarter of 2012, the Spanish economy contracted by 0.4 percent.

#7 Local governments all over Spain are flat broke and need to be bailed out by the broke national government.  The following is from a recent CNBC article….

Adding to Madrid’s woes, media reports suggested another half a dozen of Spain’s 17 regional authorities, facing an undeclared funding crisis, were ready to follow Valencia in seeking aid from the central government.

#8 The percentage of bad loans on the books of Spanish banks has reached an 18 year high.  European officials have already promised a 100 billion euro bailout for Spain’s troubled banking system, but most analysts agree that 100 billion euros will not be nearly enough.

#9 Spanish industrial output declined for the ninth month in a row in May.

#10 The unemployment rate in Spain is up to an astounding 24.6 percent.  The unemployment rate in Spain is already higher than it was in the United States at the peak of the Great Depression of the 1930s.

#11 The youth unemployment rate in Spain is now over 52 percent.

#12 The Spanish government has just announced a whole bunch of new tax increases and spending cuts which will cause the Spanish economy to slow down even more.  In response to these austerity measures, people are taking to the streets all over Spain.  Last week, 100,000 demonstrators poured into the streets to protest in Madrid alone.

Sadly, the nightmare in Spain is just beginning.

If the yield on 10 year Spanish bonds stays above 7 percent, that is going to be a really bad sign.  According to the Wall Street Journal, the 7 percent level is key as far as investor confidence is concerned….

Monday’s dramatic market moves suggest Spain may be stuck in a spiral that culminates in a bailout from other euro-zone countries.

“The rise in the 10-year yield well beyond 7% carries a very distinct reminder of events in Greece in April 2010, Ireland in October 2010 and Portugal in February 2011,” said analysts at Bank of New York Mellon. “In each case, a decisive move beyond 7% signaled the start of a collapse in investor confidence that, in each case, led to a bailout within weeks,” they added.

So keep an eye on that number in the weeks ahead.

Meanwhile, the Spanish economy continues to get worse with each passing month.

So just how bad are things in Spain right now?

Just check out this excerpt from a recent article by Mark Grant….

Recently two noted Spanish economists were interviewed. One was always an optimist and one was always a pessimist. The optimist droned on and on about how bad things were in Spain, the dire situation with the regional debt, the huge problems overtaking the Spanish banks and the imminent collapse of the Spanish economy. In the end he said that the situation was so bad that the Spanish people were going to have to eat manure. The pessimist was shocked by the comments of his colleague who had never heard him speak in such a manner. When it was the pessimist’s turn to speak he said that he agreed with the optimist with one exception; the manure would soon run out.

That may make you laugh, but for those in Europe going through these horrific economic conditions it is no laughing matter.

On Sunday, Greek Prime Minister Antonis Samaras actually told former U.S. president Bill Clinton that Greece is already in a “Great Depression“.

Like Spain, the unemployment rate in Greece is well above 20 percent and the youth unemployment rate is above 50 percent.

The only reason the Greek financial system has not totally collapsed is because of outside assistance, but now there are indications that the assistance may soon be cut off.

At this point there are persistent rumors that the IMF does not plan to give any more aid money to Greece unless Greece “shapes up”.

Meanwhile, the suffering in Greece just gets worse and worse.

Sadly, most Americans pay very little attention to what is going on in Greece and Spain.

Most Americans just assume that we will always have “the greatest economy on earth” and that we can take prosperity for granted.

Unfortunately, the truth is that the United States already has more government debt per capita than either Greece or Spain does.

Just like Greece and Spain, we are also rapidly traveling down the road to economic oblivion, and depression-like conditions will arrive in this country soon enough.

So enjoy these last months of economic prosperity while you still can.

A whole lot of pain is on the horizon.

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