Financial Crisis

10.7 Percent: Unemployment In Europe Is Worse Than It Was At The Peak Of The Last Recession

The unemployment rate in the eurozone is now 10.7 percent.  That is the highest the unemployment rate has been since the introduction of the euro.  The unemployment rate in the eurozone never got any higher than 10.2 percent during the last recession.  This is very troubling news.  It was just recently announced that the eurozone has entered another recession, and already the unemployment rate is hitting new record highs.  So how bad are things going to get in the months to come?  The truth is that the problems for Europe are just starting.  The European sovereign debt crisis continues to get worse, and another major global financial crisis is going to be here way too soon.  The EU as a whole has a larger population, a larger banking system and more Fortune 500 companies than the United States does.  When the financial system of Europe crashes, the entire world is going to feel it.

Some of the unemployment numbers coming out of Europe are absolutely staggering.

Unemployment in Spain is 19.9 percent.

Unemployment in Greece is 23.3 percent.

And when you look at youth unemployment the numbers are far worse.

The unemployment rate for workers under the age of 25 is 48.1 percent in Greece and 49.9 percent in Spain.

If you look carefully at the photos of the austerity riots happening in Spain and in Greece you will notice that the vast majority of the protesters are young people.

Instead of getting better, the unemployment numbers in Europe just keep getting worse.  Many analysts were shocked by these new numbers.  The following is from a CNN article….

“This is appalling,” said Carl Weinberg, chief economist at High Frequency Economics, highlighting that the unemployment rate following the collapse of Lehman Brothers peaked at 10.2%.

Appalling indeed.

The frightening thing is that we haven’t even had a major financial crisis in Europe yet.  So far, the powers that be have been able to keep Greece from defaulting and have been able to keep major banks all over Europe from collapsing.

But there are quite a few signs that the “moment of reckoning” for Europe is rapidly approaching….

-The European Central Bank announced on Tuesday that it would no longer take Greek bonds as collateral from European banks. That is a really bad sign.

-Major European banks are revealing unexpectedly huge losses on Greek debt.  The following is from a Reuters article….

The scars of Greece’s debt crisis were laid bare in heavy losses from a string of European banks on Thursday, and bosses warned the region’s precarious finances would continue to threaten economic growth and earnings.

From France to Germany, Britain to Belgium, four of the region’s biggest banks lined up to reveal they lost more than 8 billion euros (6.8 million pounds) last year from their Greek bonds holdings.

“We are in the worst economic crisis since 1929,” Credit Agricole chief executive Jean-Paul Chifflet said.

-The International Swaps and Derivatives Association has ruled that the Greek debt deal will not trigger payouts on credit default swaps.  This is going to make it less likely that private bondholders will voluntarily agree to the debt deal.

This ruling is also seriously shaking confidence in credit default swaps.  After all, they are supposed to be “insurance” in case something happens.  But if they aren’t going to pay out when you need them, what good are they?

-Voters in Germany are sick and tired of pouring money into a black hole.  One recent opinion poll in Germany showed that Germans are overwhelmingly against more bailouts for Greece.

Some German politicians are becoming very open about their feelings for Greece.  For example, Interior Minister Hans-Peter Friedrich said the following in a recent interview with Der Spiegel….

“Greece’s chances to regenerate itself and become competitive are surely greater outside the monetary union than if it remains in the euro area.” He added that he did not support a forced exit. “I’m not talking about throwing Greece out, but rather about creating incentives for an exit that they can’t pass up.”

-In Greece, news publications are openly portraying German Chancellor Angela Merkel as Hitler.  Far left political parties that oppose the bailouts are surging in the polls and anger and frustration are reaching unprecedented levels.

The following is from a recent article in The Guardian….

There is a growing animosity towards Germany on the streets of Athens. Angela Merkel bears most of the hostility with one of Greece’s newspapers last week mocking the chancellor up as a Nazi on its front page.

Niki Fidaki, 40, says Greeks are angry at Germany and the troika’s demands for higher taxes and public services cuts. “People can’t afford to pay the tax. My pay has gone down, but my taxes have gone up. But, I’m a lucky one – half of my friends don’t have jobs. Greeks hate that they are asking us to pay all the time when we don’t have the money. Families have no work, they have kids to look after but no money to pay for anything.”

As I have written about before, Greece is already going through a devastating economic depression.  The people of Greece are not in the mood to be pushed much further.

The eurozone is a powder keg that could explode at any time.

So why is the U.S. economy doing so much better than the European economy right now?

Well, a big reason is because we haven’t seen any austerity in the United States yet.

Barack Obama is funding our false prosperity by borrowing 150 million dollars an hour from our children and our grandchildren.

Of course all of this reckless borrowing is going to make the eventual collapse of our financial system far worse, but right now Americans don’t seem to care.  The only thing the mainstream media seems to care about is that some of our economic numbers are getting slightly better.

The sad thing is that our government is spending a lot of this money on some of the most stupid things that you could possibly imagine.

Did you know that the Obama administration just spent $750,000 on a brand new soccer field for detainees held at Guantanamo Bay?

I wish I had a $750,000 soccer field to play on.

I would love that.

Look, when the federal government quits stealing more than a trillion dollars a year from future generations things are going to look a whole lot different in this country.

So pay attention to what is going on in Europe.

That is where we are headed eventually.

The Financial Crisis Of 2008 Was Just A Warm Up Act For The Economic Horror Show That Is Coming

The people out there that believe that the U.S. economy is experiencing a permanent recovery and that very bright days are ahead for us should have their heads examined.  Unfortunately, what we are going through right now is simply just a period of “hopetimism” between two financial crashes.  Things may seem relatively stable right now, but it won’t last long.  The truth is that the financial crisis of 2008 was just a warm up act for the economic horror show that is coming.  Nothing really got fixed after the crash of 2008.  We are living in the biggest debt bubble in the history of the world, and it has gotten even bigger since then.  The “too big to fail” banks are larger now than they have ever been.  Americans continue to run up credit card balances like there is no tomorrow.  Tens of thousands of manufacturing facilities and millions of jobs continue to leave the country.  We continue to consume far more than we produce and we continue to become poorer as a nation.  None of the problems that caused the crisis of 2008 have been solved and we are even weaker financially than we were back then.  So why in the world are so many people so optimistic about the economy right now?

Just take a look at the chart posted below.  It shows the growth of total debt in the United States.  During the financial crisis of 2008 there was a little “hiccup”, but the truth is that not much deleveraging really took place at all.  And since the recession “ended”, total credit market debt has gone on to even greater heights….

So what does this mean for the future?

Well, if a small “hiccup” in the debt bubble caused so much chaos back in 2008, what is going to happen when this debt bubble finally bursts?

That is something to think about.

Sadly, most Americans seem oblivious to all of this.

If you go out to malls in the wealthy areas of America today, people are charging up a storm.  In all, Americans charged a whopping 2.5 trillion dollars on their credit cards during 2011.  Way too many people have already forgotten the lessons that we all learned back in 2008.

Of course some Americans pay off their credit cards every month, but way too many Americans are not doing that.  Today, Americans are carrying 793 billion dollars in revolving credit balances.

And student loan debt is an even bigger bubble than credit card debt is.  As I have written about previously, total student loan debt in America is rapidly approaching a trillion dollars.

So it looks like U.S. consumers have not learned to stay away from debt.

That is not good.

Well, what about the banks?

Has the financial system learned any lessons since 2008?

No, not really.

Sadly, the “too big to fail” banks are now even bigger than ever.  The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.  If they were to fail today, they would be even more of a threat to our financial system than they were back in 2008.

And our major banks continue to be very highly leveraged.  In fact, major banks all over the world are absolutely swamped with debt.

The following statistics come from Zero Hedge….

The U.S. banking system is leveraged 13 to 1.

The Japanese banking system is leveraged 23 to 1.

The French banking system is leveraged 26 to 1.

The German banking system is leveraged 32 to 1.

These are insane levels of leverage, and they are just inviting another major financial crisis.

Do you all remember Lehman Brothers?  The fact that they were leveraged so highly is what did them in back in 2008.  When the value of their holdings declined by just a little bit they were totally wiped out.

Well, during this next financial crisis large financial institutions are going to be wiped out all over the world.  Major banks all over the globe are going to be crying out for more bailouts when things take a turn against them.

They are making the exact same mistakes that they made before, and they are going to be expecting more government handouts when things go bad.

Will we ever learn?

So obviously the banking system has not learned any lessons.

What about the federal government?

Well, if you follow my blog regularly, you know that I love to write about how horrific U.S. government debt is.

Unfortunately, over the past four years things have gotten so much worse.

Back in 2008, the U.S. national debt crossed the 10 trillion dollar mark.

Just recently, it crossed the 15 trillion dollar mark.

So now we are in a much weaker position financially to respond to another major financial crisis.

Just check out the chart posted below.  This is a recipe for national financial suicide….

During fiscal 2011, the Obama administration stole close to 150 million dollars from our children and our grandchildren every single hour.

At the moment, the legacy of debt that we are passing on to future generations is sitting a grand total of $15,351,406,294,640.49.

But keep in mind that it is going up every single hour.

Meanwhile, our ability to service that debt is declining.  We are rapidly getting poorer as a nation.

During 2011, the amount of money that left the United States exceeded the amount of money that entered the United States by more than a half a trillion dollars.

This gap is called a trade deficit, and it is absolutely ripping our economy to shreds.

For a moment, imagine Uncle Sam standing next to a giant pile of money on a map of the United States.  Then imagine a half a trillion dollars being taken out of that pile every single year.

So why haven’t we totally run out of money yet?

Well, it is because we borrow those dollars back.  In order to maintain our false standard of living, our federal government, our state governments and our local governments have to go out and beg the rest of the world to lend us our dollars back.

Sadly, our government schools have “dumbed-down” the population so much that most of them don’t even know what a “trade deficit” is anymore.

Meanwhile, our economic infrastructure is being gutted like a fish.

Look, I know that I go over this point over and over and over, but it is absolutely imperative that we all understand this.

The half a trillion dollars a year that leaves this country every year could have gone to support businesses and jobs inside the United States.

But instead it is going to support businesses and jobs on the other side of the world.

The consequences of this are absolutely devastating.

According to U.S. Representative Betty Sutton, an average of 23 manufacturing facilities a day closed down in the United States during 2010.  Overall, more than 56,000 manufacturing facilities in the United States have shut down since 2001.

Even many so-called “American companies” have been bought up by the rest of the world.  The following comes from a recent article posted on Economy In Crisis….

RCA is now a French company, Zenith is a Korean company. Frigidaire is a Swedish company. IBM’s Personal Computer Division—with its 500 patents—is now a Chinese company. Westinghouse Nuclear Energy’s major shareholder is Toshiba—a Japanese Company. Lucent Technologies, a former research division of AT&T, along with all the patents acquired from the beginning of the phone system, is now a French company. In 2008, Brazilian-Belgian brewing company InBev purchased the iconic American brewer Anheuser-Busch, makers of Budweiser. With the sale of these manufacturing companies, the future profit and technologies all belong to foreign entities.

We once had the greatest economic machine in the history of the world.

Now it is being dismantled and bought up by foreigners.

When America’s economic infrastructure declines, that means that there are less jobs available for all of us.

As I wrote about the other day, the employment situation in this country is not getting better and we have never even come close to recovering from the recession that started back in 2008.

During 2008 and 2009, the U.S. economy lost millions of jobs.  Since the beginning of 2010, the percentage of the U.S. population that has had a job has remained very stable….

Normally, when a recession ends the percentage of Americans that have a job bounces back pretty dramatically.

So considering the fact that the employment situation has never recovered from the last financial crisis, what is going to happen when the next financial crisis hits?

And most of the jobs that have been “created” during this so-called “recovery” have been low income jobs.  In fact, if you look closely at the employment numbers that were released last Friday, you will find that the vast majority of the “new jobs” were part-time jobs.

But you cannot pay a mortgage and support a family on a part-time job.

Sadly, the truth is that median household income in America has been steadily dropping over the past several years.  Tens of millions of American families are deeply struggling and more Americans than ever are falling into poverty.

Back in the year 2000, about one out of every nine Americans was living in poverty.  Today, about one out of every seven Americans is living in poverty.

All of this is causing a great deal of anxiety in America today.  Large numbers of Americans know that something has fundamentally changed, even if they don’t understand the specifics.  That is one reason why sites such as this one have become so popular.  People want some answers.

And once people get some answers about what is really happening, they tend to want to prepare for the hard times that are coming.

In a few days, a new series on National Geographic entitled “Doomsday Preppers” premieres.  The mainstream media is starting to take notice of the growing “prepper” movement in America today.  It is estimated that there are at least 2 million “preppers” in the United States at this point.  Of course people are “prepping” for a whole host of reasons, but the number one concern among most groups of preppers is the economy.

As the economy crumbles, more Americans than ever have decided that it is not a good thing to be 100% dependent on the system.

Back in 2008 and 2009, millions of Americans suddenly lost their jobs.  Because they did not have any finances stored up, large numbers of them also lost their homes.  Many went from being solidly middle class to being out on the street in a matter of months.

That doesn’t have to happen to you.  Instead of blowing your money on frivolous things, do what you can to set something aside for the difficult times that are on the horizon.

A lot of those “in the know” are quietly making their own preparations.  For example, legendary film director James Cameron (Avatar, Titanic and Terminator) has purchased more than 2600 acres of farmland in New Zealand and he is getting out of the U.S. for good apparently.

Unfortunately, most of us do not have the resources for something like that.  But what most of us can do is we can change our priorities and start focusing on the things that will help us survive the hard times that are coming.

So are you ready?

Warning Signs That We Should Prepare For The Worst

The warning signs are all around us.  All we have to do is open up our eyes and look at them.  Almost every single day there are more prominent voices in the financial world telling us that a massive economic crisis is coming and that we need to prepare for the worst.  On Wednesday, it was the World Bank itself that issued a very chilling warning.  In an absolutely startling report, the World Bank revised GDP growth estimates for 2012 downward very sharply, warned that Europe could be on the verge of a devastating financial crisis, and declared that the rest of the world better “prepare for the worst.”  You would expect to hear this kind of thing on The Economic Collapse Blog, but this is not the kind of language that you would normally expect to hear from the stuffed suits at the World Bank.  Obviously things have gotten bad enough that nobody is even really trying to deny it anymore.  Andrew Burns, the lead author of the report, said that if the sovereign debt crisis gets even worse we could be looking at an economic crisis that could be even worse than the last one: “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.”  Burns also stated that the “importance of contingency planning cannot be stressed enough.”  In other words, Burns is saying that it is time to prepare for the worst.  So are you ready?

But of course it isn’t just the World Bank that is warning about these things.  The chorus of voices that is warning about the next great financial crisis just seems to grow by the day.

Some of these voices were profiled in a Bloomberg article the other day entitled “Apocalypse How? Dire ’12 Forecasts“.  The following is just a sampling of quotes from that article….

-John Mauldin, president of Millennium Wave Advisors: “We’ve got a cancer. That cancer is debt”

-Mark Spitznagel of Universa Investments: “Too much malinvestment has been kept alive, and history shows an inevitable wipeout, which started in 2000.”

-Michael Panzner of Financial Armageddon: “The fundamental outlook is even worse now than it was a few weeks ago, given (the lack of positive) developments in Europe and growing evidence that the economies of major countries around the world are deteriorating fast.”

If you have time, you should go check out the rest of that article.  It really is fascinating.

When this crisis is over, all sorts of people are going to be running around claiming that they predicted it.  But it does not take a genius to see what is coming.  All you have to do is open up your eyes and look at the flashing red warning signs.

So what should we all be looking for next?

March 20th is a key date to keep your eye on.  That is the day when Greece will either makes its 14.5 billion euro bond payment or it will default.

Greece does not have a prayer of making that payment without help.  If Greece can convince the EU and the IMF to release the next scheduled bailout payment and if Greece can reach a satisfactory deal with private bondholders, then the coming Greek default might be “orderly”.  But if something goes wrong, the coming Greek default might be quite “disorderly”.

At this point, almost everyone in the financial world is anticipating a Greek default of one form or another….

-Edward Parker, the managing director for Fitch’s sovereign and supranational group in Europe, the Middle East and Africa, recently declared that a Greek default is inevitable….

“It is going to happen. Greece is insolvent so it will default.”

-Moritz Kraemer, the head of S&P’s European sovereign ratings unit, made the following statement on Bloomberg Television on Monday:

“Greece will default very shortly. Whether there will be a solution at the end of the current rocky negotiations I cannot say.”

-Richard McGuire, a strategist at Dutch bank Rabobank, was recently quoted by CNBC as saying the following….

“People often ask if Greece is going to default which … is a misnomer because Greece is (already) defaulting”

-Diane Swonk, the chief economist at Mesirow Financial in Chicago, says that the default by Greece will probably be an “orderly” one but that the situation could change at any moment….

“It appears at the moment that the market is accepting a Greek default as inevitable, and it will be an orderly default. But that can change on a dime.”

But whether there is a default or not, the reality is that Greece is already experiencing a full-blown economic depression.  In Greece, 20 percent of all retail stores have already shut down.  The unemployment rate for those under the age of 24 is now at 39 percent.  Large numbers of Greeks are trying to get themselves and their money out of the country while they still can.

Pessimism regarding Greece is at an all-time high.  Michael Fuchs, the deputy leader of Angela Merkel’s political party, recently made the following statement….

“I don’t think that Greece, in its current condition, can be saved.”

But of course Greece is not the only declining economy in Europe by a long shot.

Italy has a much larger economy, and if Italy totally collapses it will be an absolute nightmare for the entire globe.

Right now, the Bank of Italy is forecasting a significant recession for the Italian economy in 2012.  The following is from a statement that Bank of Italy has just released….

“The uncertainty that surrounds the medium-term perspectives of the Italian economy … are extraordinarily high and are directly linked to the evolution of the eurozone debt crisis”

Italy’s youth unemployment rate has hit the highest level ever, and nearly all sectors of the Italian economy are showing signs of slowing down.

Plus there is the looming problem of Italian debt.  As I wrote about yesterday, when you add the maturing debt that the Italian government must roll over in 2012 to their projected budget deficit, it comes to 23.1 percent of Italy’s GDP.

Originally it was hoped that the economic problems in Europe could be contained to just a few countries.  But now it has become clear that is just not going to happen.

Trends forecaster Gerald Celente recently explained to ABC Australia that much of Europe is already essentially experiencing an economic depression….

“If you live in Greece, you’re in a depression; if you live in Spain, you’re in a depression; if you live in Portugal or Ireland, you’re in a depression,” Celente said. “If you live in Lithuania, you’re running to the bank to get your money out of the bank as the bank runs go on. It’s a depression. Hungary, there’s a depression, and much of Eastern Europe, Romania, Bulgaria. And there are a lot of depressions going on [already].”

The troubling news out of Europe just seems to keep coming in waves.  Here are some more recent examples….

-Manufacturing activity in the euro zone has fallen for five months in a row.

-Germany’s economy actually contracted during the 4th quarter of 2011.

-It is being reported that the Spanish economy contracted during the 4th quarter of 2011.

-Bad loans in Spain recently hit a 17-year high and the unemployment rate is at a 15-year high.

So will all of this economic trouble eventually spread to the United States?

Of course it will.

The global economy is more interconnected today than ever.  Back in 2008 the financial crisis that started on Wall Street ended up devastating economies all over the planet.  The same thing will happen during this next great financial crisis.

Only this time the U.S. is in a much weaker position.  The U.S. debt problem has gotten much worse since the last crisis.

During 2008, our national debt crossed the 10 trillion dollar mark.  Less than 4 years later, we have crossed the 15 trillion dollar mark.

So what are we going to do the next time large numbers of banks fail and unemployment skyrockets?

Where are we going to get the money to bail out all of those banks and to take care of all of those newly unemployed people?

Some people say that socialism is the answer, but the truth is that we are already a socialist welfare state.  If you can believe it, nearly half of all Americans live in a household that receives some form of financial benefits from the U.S. government.

During the next great crisis, the number of people that are dependent on the government will go even higher.

If you don’t want to end up dependent on the government, you should heed the warning signs and you should use this time to prepare for the hard times that are coming.

When even the World Bank tells us to hope for the best but to prepare for the worst, you know that it is late in the game.

Unfortunately, the vast majority of people out there only believe what they want to believe.  They don’t want to believe that a great economic crisis is coming, and so when it does happen they are going to be absolutely blindsided by it.

How To Prepare For The Difficult Years Ahead

How should people prepare for the difficult years that are coming?  I get asked about that a lot.  Once people really examine the facts, it is not too hard to convince them that an economic collapse is coming.  But once they accept that reality, most of them want to know what they can do to prepare themselves and their families for the hard times that are ahead.  Well, the truth is that it does not have to be complicated.  Many of the things discussed throughout this article are things that most of us should be doing anyway.  Now is not the time to be splurging on luxuries or expensive vacations.  Now is not the time to be going into large amounts of debt.  Instead, we all need to get back to the basics and we all need to do what we can to become more independent of the system.  Just remember what happened back in 2008.  Millions of Americans lost their jobs and millions of Americans lost their homes.  Now experts all over the globe are warning that another great financial crisis that could be just as bad as 2008 (or even worse) is coming.  Those that don’t take the time to prepare this time are not going to have any excuse.

But there is also a lot of sensationalism out there.  There are some people out there that claim that the economy is going to collapse all at once and that we are going to go from where we are now to some type of a post-apocalyptic “Mad Max” society almost overnight.

Well, that is just not going to happen.  We are not going to wake up next week in a world where we are all fighting each other with sharp pointed sticks.

Just like anything else, an economic collapse takes time.  I like to describe what is happening using an analogy from the beach.  When you build a mighty sand castle, it is not totally destroyed by the first wave that comes along, right?

Well, it is the same thing with the U.S. economy.  It was the greatest economic machine that the world has ever seen, and it is most definitely in decline.  But there are stages to that decline.

The “wave” that came along in 2008 did a huge amount of damage.  Our economy has not recovered from that.

Now another wave is coming.  But that will not be the end.  There will be other waves after that.

Eventually, this thing is coming all the way down.  Someday America will be such a horror show that it will be hard to believe that it is the same place that many of us grew up in.

But in the short-term, we are going to be facing a major league recession and millions of Americans will lose their jobs.  It won’t be the end of the world, but for some people it may feel like it.

So when you are talking about “how to prepare”, the truth is that it depends on what kind of time frame you are talking about.

In the long-term, a lot of the things that even the hardcore survivalists are doing will not be nearly enough.

In the short-term, there are things that all of us can do to weather the coming storm….

Get Out Of Debt

The global financial system is headed for a massive crisis.  Just like in 2008, a lot of people are going to lose their jobs and a lot of people are going to lose their homes.

In such an environment, it makes sense to travel as “lightly” as possible.

That means getting rid of debt.

Some forms of debt are worse than others.  Mortgage debt is not that bad.  We all need somewhere to live, and not all of us can run out and immediately pay off our mortgages.

But there are other forms of debt that are absolutely toxic.  A good example of this is credit card debt.  There are very few things that are as good at bleeding your finances as credit card debt is.  For example, according to the credit card repayment calculator, if you have a $6000 balance on a credit card with a 20 percent interest rate and only pay the minimum payment each time, it will take you 54 years to pay off that credit card.

During those 54 years you will pay $26,168 in interest rate charges on that credit card balance in addition to the $6000 in principal that you are required to pay back.  That is before any fees or penalties are even calculated.

But a lot of Americans still have not learned to stay away from credit card debt.  In fact, one out of every seven Americans has at least 10 credit cards.

Ouch.

The truth is that in future years there is a good chance that you may be facing a situation where you are not making as much income, so you want to try to start reducing your expenses right now.  Getting out of debt will help you to do this.

Save Money

A shockingly high number of American families are operating without any kind of financial cushion whatsoever….

-According to a Harris Interactive survey taken in 2010, 77 percent of all Americans are living paycheck to paycheck.

-According to one recent survey, one out of every three Americans would not be able to make a mortgage or rent payment next month if they suddenly lost their current job.

This is one reason why so many Americans have lost their homes and why so many Americans have fallen below the poverty level in recent years.  They simply had no cushion.

Last year, 2.6 million more Americans dropped into poverty.  That was the largest increase that we have seen since the U.S. government began keeping statistics on this back in 1959.

Don’t let this happen to you.  At a minimum, everyone out there should have a cushion that will cover at least 6 months worth of expenses.  Preferably, you should have a cushion that will last you at least a year.

Yes, I know that is a tall order.  But you would be amazed at how much money the average American family wastes in a typical month.  Almost all of us have areas where we can cut back.

Trust me, in the middle of a major recession you will be really glad that you are sitting on a pile of savings.

Get Independent Of The System

What would you do if you lost your job tomorrow?

Would you have any other income?

How long would it be before you lost your home?

Those are very important questions.

The truth is that the system is failing and so we all need to work hard to become more independent of the system.

So what does that mean?

Well, instead of relying on someone else to employ you indefinitely, you can start up a business in your spare time.  Yes, it will cut into your television time, but if someday you lose your job you will be extremely happy that you still have some income coming in.

Another way of becoming more independent is to start a garden.

Yes, you can run down the street and buy giant piles of cheap food right now, but that will not be the case forever.

Store Food And Focus On The Essentials

I might get into a little trouble for saying this, but the truth is that there is not going to be a major famine in America in 2012.

However, that does not mean that you should not be storing food and other essentials.

In the old days, our grandparents always saved up food.  It was just a natural thing for them to do.  This was especially the case if they lived through the Great Depression.

When hard times come, you will be glad that you have food stored up.  Plus, food is never going to be cheaper than it is today.  Having food stored up is a great hedge against the rising food prices that we will see in the future.

No, we are not going to see hyperinflation by the end of the year like many of the sensationalists are warning.  But someday you will be really glad that you stored up food for yourself and your family.

We live in a world that is becoming more unstable with each passing month.  You never know when the next natural disaster, pandemic, war or national emergency will strike.

It only makes sense to store food and other basic essentials that you will need in the future.

In a previous article entitled “20 Things You Will Need To Survive When The Economy Collapses And The Next Great Depression Begins”, I listed 20 of the things that you would need in the event of a major disaster, a national emergency or a total economic collapse.  These are things that you are going to want to make sure that you have ready right now, because after the crisis begins it may be too late to prepare….

#1) Storable Food

#2) Clean Water

#3) Shelter

#4) Warm Clothing

#5) An Axe

#6) Lighters Or Matches

#7) Hiking Boots Or Comfortable Shoes

#8) A Flashlight And/Or Lantern

#9) A Radio

#10) Communication Equipment

#11) A Swiss Army Knife

#12) Personal Hygiene Items

#13) A First Aid Kit And Other Medical Supplies

#14) Extra Gasoline (But Be Very Careful How You Store It)

#15) A Sewing Kit

#16) Self-Defense Equipment

#17) A Compass

#18) A Hiking Backpack

#19) A Community

#20) A Backup Plan

In the comments to that article, the readers suggested the following additional items….

A K-Bar Fighting Knife

Salt

Extra Batteries

Medicine

A Camp Stove

Propane

Pet Food

Heirloom Seeds

Tools

An LED Headlamp

Candles

Clorox

Calcium Hypochlorite

Ziplock Bags

Maps Of Your Area

Binoculars

Sleeping Bags

Rifle For Hunting

Extra Socks

Gloves

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Once again, a lot of these things are not going to be needed right away.  The economy is going to go through a lot more ups and downs before it totally dies.

In the short-term, keep an eye on the European debt crisis, the Japanese debt crisis and the U.S. debt crisis.  There are a lot of similarities between what happened back in 2008 and what is happening now.

And what happened following the crisis of 2008?

Unemployment shot through the roof.

So be prepared for that.

Make a plan for how you and your family will survive if you end up unemployed.

Also, when it comes to “how to prepare”, there is one aspect that is often overlooked.

During the difficult years ahead, we are all going to have to be mentally and spiritually tough.

It won’t matter how good your physical and financial preparations are if you are cowardly and paralyzed by fear.

The times that are coming are going to test all of our hearts.

Some people are going to make it and some people aren’t.

Some people will become so consumed with fear that they will give up completely.

Don’t let that happen to you.

Prepare your heart, soul, mind and body right now for what is coming.  For those that are cowardly the years ahead will be a total nightmare, but for those that overcome the fear the years ahead have the potential to be a great adventure.


A Very Scary Christmas And An Incredibly Frightening New Year

Can you hear that?  It almost sounds like a little bit of peace and quiet.  This year, the holiday season has been fairly uneventful, and for that we should be very grateful.  But it isn’t going to last long.  2012 is going to be a much more difficult year for the U.S. economy and the global financial system than 2011 has been.  So if things are going well for you right now, enjoy this little bubble of peace and tranquility while you can.  Because while things may look calm on the surface right now, the truth is that this is a very scary Christmas for financial professionals and world leaders.  Most of them know how fragile the global financial system is at the moment.  Most of them know that we are living in the greatest bubble of debt, leverage and financial risk that the world has ever seen.  As I wrote about the other day, world leaders would not be throwing huge bailouts around like crazy if everything was going to be just fine.  The truth is that we are rapidly approaching another financial crisis that may end up being even worse than the horrific crash of 2008.

Despite unprecedented efforts by the European Central Bank, the yield on 10 year Italian bonds is nearly up to 7 percent again.

Keep an eye on the yield on 10 year Italian bonds.  That is going to be one of the most important financial numbers in the world in the coming months.

But Italy is not the only problem.  The reality is that several European governments are teetering on the verge of default right now.  Meanwhile, confidence in the European financial system has been absolutely shattered and a devastating credit crunch has set in.  Nobody (other than the ECB) wants to loan money to the banks and the banks are massively cutting back on loans to businesses and consumers.  This is causing the money supply to fall.  The ECB is trying to hold things together with chicken wire and duct tape, but it isn’t going to work.

In major financial centers such as the City of London, this is a very scary Christmas and the outlook for the new year looks very frightening.  Because financial activity has dried up so dramatically, a number of firms are already shutting down.  The following comes from a recent Bloomberg article….

London’s stockbrokers are shrinking as Europe’s sovereign debt crisis and competition from international firms squeezes revenue and fees.

“This isn’t just a blip, this is much worse,” said Tim Linacre, who is stepping down as chief executive officer of Panmure (PMR) Gordon & Co., a 135-year-old brokerage. “It’s a desert for activity, which is why you are seeing some firms throw in the towel.”

In the past month, Altium Capital closed its securities unit. Evolution Group Plc (EVG), Merchant Securities Group Plc, Arbuthnot Securities Ltd. and Collins Stewart Hawkpoint Plc have all accepted takeover offers from larger competitors.

“It feels worse than any other time,” said Lorna Tilbian, an executive director at Numis Corp. who began her career in 1984. “All I hear about is people putting up a white flag.”

Many out there are wondering if we are about to face another crisis like the one we saw back in 2008.

Unfortunately, none of the underlying problems that caused that crisis were ever really fixed.

We did not learn from history so now we are in for another round of pain.

In fact, Chris Martenson believes that this next crisis will be even worse than 2008….

There are clear signs of a liquidity crunch in the asset markets right now, and the question I keep hearing is, Is this 2008 all over again?

No, it’s worse. Much worse.

In 2008 there was a lot more faith and optimism upon which to draw. But both have been squandered to significant degrees by feckless regulators and authorities who failed to properly address any of the root causes of the first crisis even as they slathered layer after layer of thin-air money over many of the symptoms.

Anyone who has paid attention knows that those “magic potions” proved to be anything but. Not only are the root causes still with us (too much debt, vast regional financial imbalances, and high energy prices), but they have actually grown worse the entire time.

Frightening stuff.

A couple of months ago, I wrote about the coming derivatives crisis that could potentially wipe out the entire global financial system.

When the next great financial crisis strikes, there is going to be a lot of focus on derivatives once again.

Top global financial authorities such as Ben Bernanke continue to insist that derivatives are perfectly safe.

But there are other voices in the financial world that are warning that we are heading for financial armageddon.  For example,just check out what Mark Faber is saying….

“I am convinced the whole derivatives market will cease to exit. Will become zero. And when it happens I don’t know: you can postpone the problems with monetary measures for a long time but you can’t solve them… Greece should have defaulted – it would have sent a message that not all derivatives are equal because it depends on the counterparty.”

That is very strong language.

Faber also believes that the stock market is going to get hit really, really hard during the coming crisis….

“I am ultra bearish. I think most people will be lucky if they still have 50% of their money in 5 years time. You have to have diversification – some real estate in the countryside, some gold and some equities because if you think it through, say Germany 1900 to today, we had WWI, we had hyperinflation, WWII, cash holders and bondholders they lost everything 3 times, but if you owned equities you’d be ok. In equities in general you will not lose it all, it may not be a good investment, unless you put it all in one company and it goes bankrupt.”

Some of the top financial officials in the entire world have also used some very scary language in recent weeks.

The head of the International Monetary Fund, Christian Lagarde, recently stated that we could soon see conditions “reminiscent of the 1930s depression” and that no country on earth “will be immune to the crisis”….

“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating”

But most people are so busy opening up the cheap plastic presents under their Christmas trees (that were mostly made overseas) that they aren’t even paying attention to these warnings.

Look, when the money supply falls significantly it is almost impossible to avoid a recession.  Just look at the historical numbers.

Unfortunately, money supply numbers all over Europe are falling dramatically right now as an article in the Telegraph recently noted….

All key measures of the money supply in the eurozone contracted in October with drastic falls across parts of southern Europe, raising the risk of severe recession over coming months.

Confidence in the banking system in Europe has never been this low in the post-World War II era.  Sadly, most people simply do not understand how bad things have gotten for major European banks.  One Australian news source recently put it this way….

“If anyone thinks things are getting better, they simply don’t understand how severe the problems are,” a London executive at a global bank said. “A major bank could fail within weeks.”

Others said many continental banks, including French, Italian and Spanish lenders, were close to running out of the acceptable forms of collateral, such as US Treasury bonds, that could be used to finance short-term loans.

Some have been forced to lend out their gold reserves to maintain access to US dollar funding.

The outlook is very ominous.

Financial professionals all over the globe are telling us what is coming if we are willing to listen.

The following comes from a report recently produced by Credit Suisse’s Fixed Income Research unit….

“We seem to have entered the last days of the euro as we currently know it. That doesn’t make a break-up very likely, but it does mean some extraordinary things will almost certainly need to happen – probably by mid-January – to prevent the progressive closure of all the euro zone sovereign bond markets, potentially accompanied by escalating runs on even the strongest banks.”

The first six months of 2012 are going to be a very key time.  National governments and big European banks are scheduled to roll over huge mountains of debt.  But if they can’t find any takers that could bring the global financial system to a moment of great crisis very quickly.

The following is how former hedge fund manager Bruce Krasting recently described the problem that Italy is facing….

At this point there is zero possibility that Italy can refinance any portion of its $300b of 2012 maturing debt. If there is anyone at the table who still thinks that Italy can pull off a miracle, they are wrong. I’m certain that the finance guys at the ECB and Italian CB understand this. I repeat, there is a zero chance for a market solution for Italy.

But even if we don’t see a formal default by a major European nation such a Italy, that doesn’t mean that major European banks are going to make it through the crippling recession that has now begun in Europe.

Charles Wyplosz, a professor of international economics at Geneva’s Graduate Institute, is absolutely convinced that we are going to see some major European banks collapse….

“Banks will collapse, including possibly a number of French banks that are very exposed to Greece, Portugal, Italy and Spain.”

Authorities in Europe are saying the “right things” publicly, but privately they are preparing for the worst.

As the Telegraph recently reported, the British government is now making plans based on the assumption that a collapse of the euro is only “just a matter of time”….

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

Yes, we are heading for a huge financial collapse and massive economic trouble.

So enjoy the good times while we still have them.

They are not going to last too much longer.

Have You Heard About The 16 Trillion Dollar Bailout The Federal Reserve Handed To The Too Big To Fail Banks?

What you are about to read should absolutely astound you.  During the last financial crisis, the Federal Reserve secretly conducted the biggest bailout in the history of the world, and the Fed fought in court for several years to keep it a secret.  Do you remember the TARP bailout?  The American people were absolutely outraged that the federal government spent 700 billion dollars bailing out the “too big to fail” banks.  Well, that bailout was pocket change compared to what the Federal Reserve did.  As you will see documented below, the Federal Reserve actually handed more than 16 trillion dollars in nearly interest-free money to the “too big to fail” banks between 2007 and 2010.  So have you heard about this on the nightly news?  Probably not.  Lately Bloomberg has been reporting on some of this, but even they are not giving people the whole picture.  The American people need to be told about this 16 trillion dollar bailout, because it is a perfect example of why the Federal Reserve needs to be shut down.  The Federal Reserve has been actively picking “winners” and “losers” in the financial system, and it turns out that the “friends” of the Fed always get bailed out and always end up among the “winners”.  This is not how a free market system is supposed to work.

According to the limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the grand total of all the secret bailouts conducted by the Federal Reserve during the last financial crisis comes to a whopping $16.1 trillion.

That is an astonishing amount of money.

Keep in mind that the GDP of the United States for the entire year of 2010 was only 14.58 trillion dollars.

The total U.S. national debt is only a bit above 15 trillion dollars right now.

So 16 trillion dollars is an almost inconceivable amount of money.

But some other dollar figures have been thrown around lately regarding these secret Federal Reserve bailouts.  Let’s take a look at them and see what they mean.

$1.2 Trillion

A recent Bloomberg article made the following statement….

The $1.2 trillion peak on Dec. 5, 2008 — the combined outstanding balance under the seven programs tallied by Bloomberg — was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

The $1.2 trillion figure represents the peak outstanding balance on these loans, not the total amount of all the loans.  On December 5, 2008 the “too big to fail” banks owed this much money to the Federal Reserve.  Many of them could not pay these short-term loans back right away and had to keep rolling them over time after time.  Each time a short-term loan got rolled over that represented a new loan.

$7.7 Trillion

Bloomberg is reporting that the Federal Reserve had made a total of $7.77 trillion in financial commitments to the big banks by the end of March 2009….

Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

But as mentioned above, a one-time limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act covered an even broader time period and revealed even more bailout loans.

According to the GAO audit, $16.1 trillion in secret loans were made by the Federal Reserve between December 1, 2007 and July 21, 2010.  The following list of firms and the amount of money that they received was taken directly from page 131 of the GAO audit report….

Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Merrill Lynch – $1.949 trillion
Bank of America – $1.344 trillion
Barclays PLC – $868 billion
Bear Sterns – $853 billion
Goldman Sachs – $814 billion
Royal Bank of Scotland – $541 billion
JP Morgan Chase – $391 billion
Deutsche Bank – $354 billion
UBS – $287 billion
Credit Suisse – $262 billion
Lehman Brothers – $183 billion
Bank of Scotland – $181 billion
BNP Paribas – $175 billion
Wells Fargo – $159 billion
Dexia – $159 billion
Wachovia – $142 billion
Dresdner Bank – $135 billion
Societe Generale – $124 billion
“All Other Borrowers” – $2.639 trillion

This report was made available to all the members of Congress, but most of them have been totally silent about it.  One of the only members of Congress that has said something has been U.S. Senator Bernie Sanders.

The following is an excerpt from a statement about this audit that was taken from the official website of Senator Sanders….

“As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world”

So where is everyone else?

Why aren’t leading Republicans and leading Democrats crying bloody murder over this report?

This scandal should have been front page news for months when it was revealed.

But it wasn’t.

And Guess what?

Not only did the Federal Reserve give 16.1 trillion dollars in nearly interest-free loans to the “too big to fail” banks, the Fed also paid them over 600 million dollars to help run the emergency lending program.  According to the GAO, the Federal Reserve shelled out an astounding $659.4 million in “fees” to the very financial institutions which caused the financial crisis in the first place.

In addition, it turns out that trillions of dollars of this bailout money actually went overseas.  According to the GAO audit, approximately $3.08 trillion went to foreign banks in Europe and in Asia.

So why were our dollars being used to bail out foreign banks while tens of millions of American families were deeply suffering?

That is a very good question.

Also, it is important to remember that many of these bailout loans were made at below market interest rates, and this enabled many of these financial institutions to rake in huge profits.

According to a recent Bloomberg article, the big banks brought in an estimated $13 billion by taking advantage of the Fed’s below-market rates….

While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.

So once the financial crisis was over, were adjustments made to the financial system to make sure that this type of thing would never happen again?

Of course not.

Today, the “too big to fail” banks are larger than ever.  The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.

So now they are more “too big to fail” than ever.

But this is what happens when we allow unelected central bank bureaucrats to run our financial system.

Most Americans do not realize this, but the truth is that the Federal Reserve is not part of the government.  In fact, it is about as “federal” as Federal Express is.  The Federal Reserve has admitted that they are a privately owned institution in court many times, and you can see video of a Federal Reserve employee admitting that the Federal Reserve is privately owned right here.

The Federal Reserve is an out of control monster that is throwing around trillions of dollars whenever it wants to.  Nobody should be allowed to do this.  Nobody should be allowed to give bailouts to banks and corporations without the express permission of the U.S. Congress and the president of the United States.

This is a point that I made in my article yesterday.  The Federal Reserve decided this week that it is going to provide “liquidity support” to Europe.  If the American people do not like this move, that is just too bad.  We do not get a say in the matter.

Are you starting to understand why I keep pushing the idea that it is time to shut down the Federal Reserve?

Please share this information about the secret 16 trillion dollar Federal Reserve bailout with your family and your friends.

If we can get enough people to wake up, perhaps there is still time to change the direction that this country is headed.

22 Reasons Why We Could See An Economic Collapse In Europe In 2012

Will 2012 be the year that we see an economic collapse in Europe?  Before you dismiss the title of this article as “alarmist”, read the facts listed in the rest of this article first.  Over the past several months, there has been an astonishing loss of confidence in the European financial system.  Right now, virtually nobody wants to loan money to financially troubled nations in the EU and virtually nobody wants to lend money to major European banks.  Remember, one of the primary reasons for the financial crisis of 2008 was a major credit crunch that happened here in the United States.  This burgeoning credit crunch in Europe is just one element of a “perfect storm” that is rapidly coming together as we get ready to go into 2012.  The signs of trouble are everywhere.  All over Europe, governments are implementing austerity measures and dramatically cutting back on spending.  European banks are substantially cutting back on lending as they seek to meet new capital requirements that are being imposed upon them.  Meanwhile, bond yields are going through the roof all over Europe as investors lose confidence and demand much higher returns for investing in European debt.  It has become clear that without a miracle happening, quite a few European nations and a significant number of European banks are not going to be able to get the funding that they need from the market in 2012.  The only thing that is going to avert a complete and total financial meltdown in Europe is dramatic action, but right now European leaders are so busy squabbling with each other that a bold plan seems out of the question.

The following are 22 reasons why we could see an economic collapse in Europe in 2012….

#1 Germany could rescue the rest of Europe, but that would take an unprecedented financial commitment, and the German people do not have the stomach for that.  It has been estimated that it would cost Germany 7 percent of GDP over several years in order to sufficiently bail out the other financially troubled EU nations.  Such an amount would far surpass the incredibly oppressive reparations that Germany was forced to pay out in the aftermath of World War I.

A host of recent surveys has shown that the German people are steadfastly against bailing out the rest of Europe.  For example, according to one recent poll 57 percent of the German people are against the creation of eurobonds.

At this point, German politicians are firmly opposed to any measure that would place an inordinate burden on German taxpayers, so unless this changes that means that Europe is not going to be saved from within.

#2 The United States could rescue Europe, but the Obama administration knows that it would be really tough to sell that to the American people during an election season.  The following is what White House Press Secretary Jay Carney said today about the potential for a bailout of Europe by the United States….

“This is something they need to solve and they have the capacity to solve, both financial capacity and political will”

Carney also said that the Obama administration does not plan to commit any “additional resources” to rescuing Europe….

“We do not in any way believe that additional resources are required from the United States and from American taxpayers.”

#3 Right now, banks all over Europe are in deleveraging mode as they attempt to meet new capital-adequacy requirements by next June.

According to renowned financial journalist Ambrose Evans-Pritchard, European banks need to reduce the amount of lending on their books by about 7 trillion dollars in order to get down to safe levels….

Europe’s banks face a $7 trillion lending contraction to bring their balance sheets in line with the US and Japan, threatening to trap the region in a credit crunch and chronic depression for a decade.

So what does that mean?

It means that European banks are going to be getting really, really stingy with loans.

That means that it is going to become really hard to buy a home or expand a business in Europe, and that means that the economy of Europe is going to slow down substantially.

#4 European banks are overloaded with “toxic assets” that they are desperate to get rid of.  Just like we saw with U.S. banks back in 2008, major European banks are busy trying to unload mountains of worthless assets that have a book value of trillions of euros, but virtually nobody wants to buy them.

#5 Government austerity programs are now being implemented all over Europe.  But government austerity programs can have very negative economic effects.  For example, we have already seen what government austerity has done to Greece. 100,000 businesses have closed and a third of the population is now living in poverty.

But now governments all over Europe have decided that austerity is the way to go.  The following comes from a recent article in the Economist….

France’s budget plans are close to being agreed on; further cuts are likely but will be delayed until after the elections in spring. Italy has yet to vote through a much-revised package of cuts. Spain’s incoming government has promised further spending cuts, especially in regional outlays, in order to meet deficit targets agreed with Brussels.

#6 The amount of debt owed by some of these European nations is so large that it is difficult to comprehend.  For example, Greece, Portugal, Ireland, Italy and Spain owe the rest of the world about 3 trillion euros combined.

So what will massive government austerity do to troubled nations such as Spain, Portugal, Ireland and Italy?  Ambrose Evans-Pritchard is very concerned about what even more joblessness will mean for many of those countries….

Even today, the jobless rate for youth is near 10pc in Japan. It is already 46pc in Spain, 43pc in Greece, 32pc in Ireland, and 27pc in Italy. We will discover over time what yet more debt deleveraging will do to these societies.

#7 Europe was able to bail out Greece and Ireland, but there is no way that Italy will be able to be rescued if they require a full-blown bailout.

Unfortunately, Italy is in the midst of a massive financial meltdown as you read this.  The yield on two year Italian bonds is now about double what it was for most of the summer.  There is no way that is sustainable.

It would be hard to overstate how much of a crisis Italy represents.  The following is how former hedge fund manager Bruce Krasting recently described the current situation….

At this point there is zero possibility that Italy can refinance any portion of its $300b of 2012 maturing debt. If there is anyone at the table who still thinks that Italy can pull off a miracle, they are wrong. I’m certain that the finance guys at the ECB and Italian CB understand this. I repeat, there is a zero chance for a market solution for Italy.

Krasting believes that either Italy gets a gigantic mountain of cash from somewhere or they will default within six months and that will mean the start of a global depression….

I think the Italian story is make or break. Either this gets fixed or Italy defaults in less than six months. The default option is not really an option that policy makers would consider. If Italy can’t make it, then there will be a very big crashing sound. It would end up taking out most of the global lenders, a fair number of countries would follow into Italy’s vortex. In my opinion a default by Italy is certain to bring a global depression; one that would take many years to crawl out of.

#8 An Italian default may be closer than most people think.  As the Telegraph recently reported, just to refinance existing debt, the Italian government must sell more than 30 billion euros worth of new bonds by the end of January….

Italy’s new government will have to sell more than EURO 30 billion of new bonds by the end of January to refinance its debts. Analysts say there is no guarantee that investors will buy all of those bonds, which could force Italy to default.

The Italian government yesterday said that in talks with German Chancellor Angela Merkel and French President Nicolas Sarkozy, Prime Minister Mario Monti had agreed that an Italian collapse “would inevitably be the end of the euro.”

#9 European nations other than just the “PIIGS” are getting into an increasing amount of trouble.  For example, S&P recently slashed the credit rating of Belgium to AA.

#10 Credit downgrades are coming fast and furious all over Europe now.  At this point it seems like we see a new downgrade almost every single week.  Some nations have been downgraded several times.  For instance, Fitch has downgraded the credit rating of Portugal again.  At this point it is being projected that Portuguese GDP will shrink by about 3 percent in 2012.

#11 The financial collapse of Hungary didn’t make many headlines in the United States, but it should have.  Moody’s has cut the credit rating of Hungarian debt to junk status, and Hungary has now submitted a formal request to the EU and the IMF for a bailout.

#12 Even faith in German debt seems to be wavering. Last week, Germany had “one of its worst bond auctions ever“.

#13 German banks are also starting to show signs of weakness.  The other day, Moody’s downgraded the ratings of 10 major German banks.

#14 As the Telegraph recently reported, the British government is now making plans based on the assumption that a collapse of the euro is only “just a matter of time”….

As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.

Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.

The Treasury confirmed earlier this month that contingency planning for a collapse is now under way.

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

#15 The EFSF was supposed to help bring some stability to the situation, but the truth is that the EFSF is already a bad joke.  It has been reported that the EFSF has already been forced to buy up huge numbers of its own bonds.

#16 Unfortunately, it looks like a run on the banks has already begun in Europe.  The following comes from a recent article in The Economist….

“We are starting to witness signs that corporates are withdrawing deposits from banks in Spain, Italy, France and Belgium,” an analyst at Citi Group wrote in a recent report. “This is a worrying development.”

#17 Confidence in European banks has been absolutely shattered and virtually nobody wants to lend them money right now.

The following is a short excerpt from a recent CNBC article….

Money-market funds in the United States have quite dramatically slammed shut their lending windows to European banks. According to the Economist, Fitch estimates U.S. money market funds have withdrawn 42 percent of their money from European banks in general.

And for France that number is even higher — 69 percent. European money-market funds are also getting in on the act.

#18 There are dozens of major European banks that are in danger of failing.  The reality is that most major European banks are leveraged to the hilt and are massively exposed to sovereign debt.  Before it fell in 2008, Lehman Brothers was leveraged 31 to 1.  Today, major German banks are leveraged 32 to 1, and those banks are currently holding a massive amount of European sovereign debt.

#19 According to the New York Times, the economy of the EU is already projected to shrink slightly next year, and this doesn’t even take into account what is going to happen in the event of a total financial collapse.

#20 There are already signs that the European economy is seriously slowing down.  Industrial orders in the eurozone declined by 6.4 percent during September.  That was the largest decline that we have seen since the midst of the financial crisis in 2008.

#21 Panic and fear are everywhere in Europe right now.  The European Commission’s index of consumer confidence has declined for five months in a row.

#22 European leaders are really busy fighting with each other and a true consensus on how to solve the current problems seems way off at the moment.  The following is how the Express recently described rising tensions between German and British leaders….

The German Chancellor rejected outright Mr Cameron’s opposition to a new EU-wide financial tax that would have a devastating impact on the City of London.

And she refused to be persuaded by his call for the European Central Bank to support the euro. Money markets took a dip after their failure to agree.

Are you starting to get the picture?

The European financial system is in a massive amount of trouble, and when it melts down the entire globe is going to be shaken.

But it isn’t just me that is saying this.  As I mentioned in a previous article, there are huge numbers of respected economists all over the globe that are now saying that Europe is on the verge of collapse.

For example, just check out what Credit Suisse is saying about the situation in Europe….

“We seem to have entered the last days of the euro as we currently know it. That doesn’t make a break-up very likely, but it does mean some extraordinary things will almost certainly need to happen – probably by mid-January – to prevent the progressive closure of all the euro zone sovereign bond markets, potentially accompanied by escalating runs on even the strongest banks.”

Many European leaders are promoting much deeper integration and a “European superstate” as the answer to these problems, but it would take years to implement changes that drastic, and Europe does not have that kind of time.

If Europe experiences a massive economic collapse and a prolonged depression, it may seem like “the end of the world” to some people, but things will eventually stabilize.

A lot of people out there seem to think that the global economy is going to go from its present state to “Mad Max” in a matter of weeks.  Well, that is just not going to happen.  The coming troubles in Europe will just be another “wave” in the ongoing economic collapse of the western world.  There will be other “waves” after that.

Of course this current sovereign debt crisis could be entirely averted if the countries of the western world would just shut down their central banks and start issuing debt-free money.

The truth is that there is no reason why any sovereign nation on earth ever has to go a penny into debt to anyone.  If a nation is truly sovereign, then the government has the right to issue all of the debt-free money that it wants.  Yes, inflation would always be a potential danger in such a system (just as it is under central banking), but debt-free money would mean that government debt problems would be a thing of the past.

Unfortunately, most of the countries of the world operate under a system where more government debt is created when more currency is created.  The inevitable result of such a system is what we are witnessing now.  At this point, nearly the entire western world is drowning in debt.

There are alternatives to our current system.  But nobody in the mainstream media ever talks about them.

So instead of focusing on truly creative ways to deal with our current problems, we are all going to experience the bitter pain of the coming economic collapse instead.

Things did not have to turn out this way.

The Coming European Superstate That Germany Plans To Cram Down The Throats Of The Rest Of Europe

A lot of people were puzzled about what German Chancellor Angela Merkel meant when she recently stated that the ultimate solution to the financial crisis in the EU would “mean more Europe, not less Europe”.  Well, now we are finding out.  A leaked internal German government memo entitled “The Future of the EU: Required Integration Policy Improvements for the Creation of a Stability Union” actually proposes the creation of a “European Monetary Fund” which would be given the power to run the economies of troubled European nations.  This “stability union” would be quickly followed by the creation of a full-fledged “political union”.  Essentially, this leaked memo proposes the creation of a “European Superstate” which will be crammed down the throats of the rest of Europe whether they like it or not.  National sovereignty would be a thing of the past and European bureaucrats would run everything.  Of course this will never be accepted by the people of Europe until they feel the bitter pain of the coming financial collapse, but we are starting to see that there is already a clear plan for what the Germans wish to implement in the aftermath of the coming crisis.

A lot of people have just assumed that if there is a massive financial collapse in Europe and the euro crashes that it will mean that end of the euro and potentially the breakup of the EU.  But that is not what the Germans have planned at all.

An article in the Telegraph has posted details about the leaked internal German government memo mentioned above.  It really is startling to see that a full-fledged “political union” in Europe is being discussed at the highest levels of the German government….

The six-page memo, by the German foreign office, argues that Europe’s economic powerhouses should be able to intervene in how beleaguered eurozone countries are run.

The confidential blueprint sets out Germany’s plan to tackle the eurozone debt crisis by creating a “stability union” that will be “immediately followed by moves “on the way towards a political union”.

It will prompt fears that Germany’s euro crisis plans could result in a European super-state with spending and tax plans set in Brussels.

Can you imagine what Europe would look like under such a plan?

National sovereignty would be a thing of the past.

Another article in the Telegraph says that the leaked memo proposes that immediately a “European Monetary Fund” should be set up that would have the power to take over and run the economies of European nations that get into too much debt.  But according to the memo this would just be an intermediate step toward a full “political union”….

The six-page German foreign ministry paper sets out plans for the creation of a European Monetary Fund with a transfer of sovereignty away from member states.

The fund will have the power to take ailing countries into receivership and run their economies. Even more controversially, the document, entitled The future of the EU: required integration policy improvements for the creation of a Stability Union, declares that the treaty changes are a first stage “in which the EU will develop into a political union”. “The debate on the way towards a political union must begin as soon as the course toward stability union is charted,” it concludes.

As the crisis in Europe has gotten worse, the Germans have become more aggressive about throwing their weight around.  At this point, German Chancellor Angela Merkel is the most important politician in Europe and she has been taking the lead in responding to this financial crisis.

As I have written about previously, there have been persistent rumors that French President Nicolas Sarkozy and German Chancellor Angela Merkel have been “secretly plotting” to create a “new eurozone” that will fundamentally change the way that Europe is run.

For example, the following is from an article that recently came out  in the Telegraph….

France is drawing up plans to create a breakaway organisation of eurozone countries with its own treaty, parliament and headquarters – a move that could significantly undermine the existing European Union.

That same article also talked about the goals that France and Germany are hoping to achieve through all of this….

France and Germany are understood to want to strengthen the union between eurozone countries with new taxes and legal measures to stop nations borrowing and spending too much in future.

Of course it is important to note that there is no way that the people of Europe are going to go for any of this right now.

But after feeling the pain of a massive financial collapse for a while will they change their minds?

What is clear is that the status quo is not going to last much longer.  Something has got to change.  Unfortunately, Germany and France seem determined to push the rest of Europe in the direction of creating a European Superstate.

If you want to get a really good idea of what is happening in Europe right now, just check out this video of a recent speech by Nigel Farage on the floor of the European Parliament on November 16th, 2011.  Trust me, it is worth the couple of minutes that it takes to watch it.

But before fundamental structural changes take place in Europe, we are going to see an absolutely crippling financial collapse first.  With each passing day, there are more signs that things are rapidly unraveling.  The following are just a few of the noteworthy news items from Europe that have come out over the past week….

*In Italy there were violent clashes between protesters and police after Mario Monti unveiled his new austerity program.  To get an idea of how crazy things are getting over in Italy, just check out this video.

*Just like what happened when austerity was implemented in Greece, it looks like Italy is now headed down the road toward a major recession.  Industrial orders in Italy for the month of September declined by 8.5 percent.  That is really, really bad news.

*The EFSF has already been forced to buy up huge numbers of its own bonds.  That essentially means that the EFSF is already a bad joke.

*Dozens of big banks all over Europe have been downgraded in recent weeks.  Even German banks are getting downgraded now.  The other day, Moody’s downgraded the ratings of 10 major German banks.

An increasing number of people that work in the financial world are starting to get really freaked out about everything that is going on.

The following is what Mark Mobius, head of the emerging markets desk at Templeton Asset Management, had to say recently….

“There is definitely going to be another financial crisis around the corner, because we haven’t solved any of the things that caused the previous crisis.”

Willem Buiter, the chief economist of Citigroup, believes that if something is not done quickly, there will be a financial collapse in Europe in very short order….

“Time is running out fast.  I think we have maybe a few months — it could be weeks, it could be days — before there is a material risk of a fundamentally unnecessary default by a country like Spain or Italy which would be a financial catastrophe dragging the European banking system and North America with it. So they have to act now.”

Ann Barnhardt of Barnhardt Capital Management actually shut down her entire firm because she could no longer guarantee that the money her clients were putting into the futures and options markets would be safe.  Posted below are extended excerpts from the open letter that she recently released to the public.  Normally I would not post such extended excerpts, but in this case I believe that they are warranted.  What Barnhardt has written should be a huge wake up call for all of us.  It is refreshing (and a bit frightening) to get an honest assessment of the corruption in the financial world from someone that has made a good living in that world.  The following is how she began her letter….

It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.

The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.

So how did the MF Global collapse wreck the system?  Barnhardt went on to explain this….

The futures markets are very highly-leveraged and thus require an exceptionally firm base upon which to function. That base was the sacrosanct segregation of customer funds from clearing firm capital, with additional emergency financial backing provided by the exchanges themselves. Up until a few weeks ago, that base existed, and had worked flawlessly. Firms came and went, with some imploding in spectacular fashion. Whenever a firm failure happened, the customer funds were intact and the exchanges would step in to backstop everything and keep customers 100% liquid – even as their clearing firm collapsed and was quickly replaced by another firm within the system.

Everything changed just a few short weeks ago. A firm, led by a crony of the Obama regime, stole all of the non-margined cash held by customers of his firm. Let’s not sugar-coat this or make this crime seem “complex” and “abstract” by drowning ourselves in six-dollar words and uber-technical jargon. Jon Corzine STOLE the customer cash at MF Global. Knowing Jon Corzine, and knowing the abject lawlessness and contempt for humanity of the Marxist Obama regime and its cronies, this is not really a surprise. What was a surprise was the reaction of the exchanges and regulators. Their reaction has been to take a bad situation and make it orders of magnitude worse. Specifically, they froze customers out of their accounts WHILE THE MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate. This is unfathomable. The risk exposure precedent that has been set is completely intolerable and has destroyed the entire industry paradigm. No informed person can continue to engage these markets, and no moral person can continue to broker or facilitate customer engagement in what is now a massive game of Russian Roulette.

Even more frightening, Barnhardt says that the MF Global collapse is just the “tip of the iceberg” and that more collapses like this are about to happen….

I have learned over the last week that MF Global is almost certainly the mere tip of the iceberg. There is massive industry-wide exposure to European sovereign junk debt. While other firms may not be as heavily leveraged as Corzine had MFG leveraged, and it is now thought that MFG’s leverage may have been in excess of 100:1, they are still suicidally leveraged and will likely stand massive, unmeetable collateral calls in the coming days and weeks as Europe inevitably collapses. I now suspect that the reason the Chicago Mercantile Exchange did not immediately step in to backstop the MFG implosion was because they knew and know that if they backstopped MFG, they would then be expected to backstop all of the other firms in the system when the failures began to cascade – and there simply isn’t that much money in the entire system. In short, the problem is a SYSTEMIC problem, not merely isolated to one firm.

So what does Barnhardt say that we should all do?  She is actually recommending that everyone should completely abandon the futures and options markets….

And so, to the very unpleasant crux of the matter. The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity. The system is no longer functioning with integrity and is suicidally risk-laden. The rule of law is non-existent, instead replaced with godless, criminal political cronyism.

Remember, a few weeks ago I warned you all that a massive derivatives crisis is coming.  Anyone that plays around with derivatives at this point is playing with fire.  Barnhardt says that she will never reopen her firm until Barack Obama is removed from office and fundamental reforms to the financial system have been implemented….

Finally, I will not, under any circumstance, consider reforming and re-opening Barnhardt Capital Management, or any other iteration of a brokerage business, until Barack Obama has been removed from office AND the government of the United States has been sufficiently reformed and repopulated so as to engender my total and complete confidence in the government, its adherence to and enforcement of the rule of law, and in its competent and just regulatory oversight of any commodities markets that may reform. So long as the government remains criminal, it would serve no purpose whatsoever to attempt to rebuild the futures industry or my firm, because in a lawless environment, the same thievery and fraud would simply happen again, and the criminals would go unpunished, sheltered by the criminal oligarchy.

We are on the verge of a financial crisis that could potentially be just as bad (or even worse) than the financial crisis of 2008.

Right now, 2012 is shaping up as a very, very bad year.

As I have written about previously, when European leaders proposed that private Greek bondholders should take a “50% haircut”, they massively undermined faith in the European financial system.

Now panic and fear are in the air and it is unlikely that financial markets will be calmed any time soon.

Already, there are early signs of the kind of massive credit crunch that almost brought about “the end of the world” in financial markets back in 2008.

For example, a CNBC article that was posted on Friday reported that the flow of credit in Europe is seriously drying up….

Fear over European banks’ exposure to risky government debt stalked markets and harried bank executives on Friday, as unsecured lending between banks evaporated and the cost of secured loans rose.

And as a recent article posted on Zero Hedge discussed, a similar thing is starting to happen in the United States….

The entire dollar funding market is now at levels not seen since the Lehman collapse and is effectively frozen. Only this time it is much, much worse as never before has the global central bank cadre been assumed and implied to be backstopping the global liquidity cascade. Ex-out the implied backstop by the monetary authorities, and liquidity is now locked up more than ever in the history of capital markets.

So what should we do about this?

We should take action and get prepared for what is coming.

Unfortunately, an increasing number of Americans seem to be “checking out” instead.  According to a recent Gallup poll, alcohol consumption in the United States has hit a 25 year high.  More than one out of every ten Americans over the age of 12 is on prescription antidepressants, and most American families spend endless hours staring at the television in an attempt to escape the pain and the frustration that they constantly feel.

Hopefully by working together we can help more Americans (and more Europeans as well) to wake up, to get off their couches, and to take action in a positive way.

Time is running out and the economic crisis is rapidly getting worse.

We don’t have any time to waste.

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