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The Almighty Dollar Is In Peril As The Global ‘De-Dollarization’ Trend Accelerates

50 Dollars - Public DomainAs the Obama administration continues to alienate almost everyone else around the entire planet, an increasing number of prominent international voices are starting to question why the U.S. dollar should be so overwhelmingly dominant in global trade.  In previous articles, I have discussed Russia’s “de-dollarization strategy” and the fact that Gazprom is now asking their large customers to start paying in currencies other than the dollar.  But this is not just a story about Russia any longer.  As you will read about below, China and South Korea have just signed a major agreement to facilitate trade with one another using their own national currencies, and even prominent French officials are now talking about the need to use the dollar less and the euro more.  John Williams of shadowstats.com recently said that things have never “been more negative” for the U.S. dollar, and he was right on the mark.  The power of the almighty dollar has allowed all of us living in the United States to enjoy an extremely high standard of living for decades, but as that power now fades it is going to have profound implications for the U.S. economy.  In future years the value of the dollar will go down substantially, all of the imported goods filling our stores will become much more expensive, and it is going to cost the federal government a lot more to borrow money.  Unfortunately, with the stock market hitting all-time record highs and with the mainstream media endlessly touting an “economic recovery”, most Americans are not paying any attention to these things.

French oil giant Total is one of the largest energy companies in the entire world.  On Saturday, Total’s CEO made an absolutely stunning statement.  According to Reuters, he told reporters that there “is no reason to pay for oil in dollars”…

“Doing without the (U.S.) dollar, that wouldn’t be realistic, but it would be good if the euro was used more,” he told reporters.

“There is no reason to pay for oil in dollars,” he said. He said the fact that oil prices are quoted in dollars per barrel did not mean that payments actually had to be made in that currency.

If Gazprom’s CEO had made such a statement, it would not have really surprised anyone.  But this came from a high profile French CEO.  A decade ago, it would have been unthinkable for him to say such a thing.  Wars have been started over less.  Virtually all oil and natural gas around the planet has been bought and sold for U.S. dollars since the 1970s, and this is an arrangement that the U.S. government has traditionally guarded very zealously.  But now that Russia has broken the petrodollar monopoly, the fear of questioning the almighty dollar appears to be dissipating.

And at this point even French government officials are not afraid to publicly discuss moving away from the U.S. dollar.  Just check out what French finance minister Michel Sapin said to the press this weekend…

French finance minister Michel Sapin says “now is the right time to bolster the use of the euro” adding, more ominously for the dollar, “we sell ourselves aircraft in dollars. Is that really necessary? I don’t think so.” Careful to avoid upsetting his ‘allies’ across the pond, Sapin followed up with the slam-dunk diplomacy, “This is not a fight against dollar imperialism,” except, of course – that’s exactly what it is… just as it was over 40 years ago when the French challenged Nixon.

So why are the French suddenly so upset?

Could it be the fact that we just slapped the largest bank in France with a nearly 9 billion dollar fine?…

The remarks come a week after Paris-based bank BNP Paribas (BNP) SA was slapped with a $8.97 billion fine by U.S. authorities for transactions carried out in dollars in countries facing American sanctions. The fine spurred debate in France about the right of the U.S. in extending its regulatory reach beyond its borders.

This is yet another example of how the Obama administration is alienating friends all over the globe.

In fact, there doesn’t seem to be anyone that the Obama administration is afraid of crossing.  Just a couple of days ago, the German press exploded in outrage when Germany arrested a U.S. spy.  Why we feel the need to spy on our friends is something that I will never figure out.

And of course our relations with Russia are probably the worst that they have been since the end of the Cold War at this point.  And as the Russians now rapidly move away from the U.S. dollar, they seem intent on bringing the rest of “the BRICS” with them.  The following is a short excerpt from a recent Voice of Russia article entitled “BRICS morphing into anti-dollar alliance“…

However, in her discussion with Vladimir Putin, the head of the Russian central bank unveiled an elegant technical solution for this problem and left a clear hint regarding the members of the anti-dollar alliance that is being created by the efforts of Moscow and Beijing:

“We’ve done a lot of work on the ruble-yuan swap deal in order to facilitate trade financing. I have a meeting next week in Beijing,” she said casually and then dropped the bomb: “We are discussing with China and our BRICS parters the establishment of a system of multilateral swaps that will allow to transfer resources to one or another country, if needed. A part of the currency reserves can be directed to [the new system].” (source of the quote: Prime news agency)

It seems that the Kremlin chose the all-in-one approach for establishing its anti-dollar alliance. Currency swaps between the BRICS central banks will facilitate trade financing while completely bypassing the dollar. At the same time, the new system will also act as a de facto replacement of the IMF, because it will allow the members of the alliance to direct resources to finance the weaker countries. As an important bonus, derived from this “quasi-IMF” system, the BRICS will use a part (most likely the “dollar part”) of their currency reserves to support it, thus drastically reducing the amount of dollar-based instruments bought by some of the biggest foreign creditors of the US.

Of course the key economic player in the BRICS alliance is China.

So will China actually go along with a “de-dollarization” strategy?

Well, the truth is that China has been making moves to become more independent of the dollar for a long time, and it has just been announced that China and South Korea have signed an agreement which will mean more direct trade between the two nations using their own national currencies…

China’s central bank has authorized the Bank of Communications, the country’s fifth largest lender, to undertake yuan clearing business in the South Korean capital, the People’s Bank of China (PBoC) said in a statement.

The announcement came as Chinese President Xi Jinping wrapped up a state visit to South Korea on Friday. China is seeking to make the yuan – also known as the renminbi – used more internationally in keeping with the country’s status as the world’s second biggest economy behind the United States.

Unfortunately, most Americans don’t care about any of this at all.

They don’t understand that more U.S. dollars are actually used outside the United States than are used inside the United States.  Because most of the rest of the world uses U.S. dollars to trade with one another, this has created a tremendous amount of artificial demand for our currency.  In other words, the value of the U.S. dollar is much higher than it otherwise would be, and this has enabled us to import trillions of dollars of products at ridiculously low prices.  The standard of living that we enjoy today is highly dependent on this arrangement continuing.

And our ability to fund the federal government and our state and local governments is heavily dependent on the rest of the planet loaning our dollars back to us for next to nothing.  If we actually had to pay realistic market rates to borrow money, the finances of the federal government would have already collapsed long ago.

So it is absolutely imperative for our own economic well-being that this “de-dollarization” trend not accelerate any further.  The rest of the world could actually severely hurt us by deciding to stop using the almighty dollar, and the more that the Obama administration antagonizes both our friends and our foes around the globe the more likely that is to happen.

We live in very perilous times, and the almighty dollar is more vulnerable now than it has been in decades.

If it starts collapsing, it will take down the entire U.S. financial system with it.

Let us hope that we still have a bit more time before that happens, because once the U.S. dollar collapses it will be exceedingly painful for all of us.

Eurobonds: The Issue That Could Shatter Europe

Would you pool your debt with a bunch of debt addicts that have no intention of reducing their wild spending habits?  Of course you wouldn’t.  But that is exactly what Germany is being asked to do.  Increasingly, “eurobonds” are being touted as the best long-term solution to the financial crisis in Europe.  These eurobonds would represent jointly issued debt by all 17 members of the eurozone.  This debt would also be guaranteed by all 17 members of the eurozone.  This would allow all countries in the eurozone to enjoy the same credit rating that Germany does, and borrowing costs for nations such as Greece, Portugal, Italy and Spain would plummet.  But borrowing costs for Germany would rise substantially.  In fact, it is being estimated that Germany could be facing an extra 50 billion euros a year in interest expenses.  So over ten years that would come to about 500 billion euros.  Needless to say, Germany is not thrilled about this idea.  But new French President Francois Hollande is pushing eurobonds very hard, and he has the support of the OECD, the IMF and many top Italian politicians.  In the end, this could be the key to the future of the eurozone.  If the Germans give in and decide that they are willing to deeply subsidize their profligate neighbors indefinitely, then the euro could potentially be saved.  If not, then this issue could end up shattering Europe.

It is easy to try to portray the Germans as the “bad guys” in all this, but try to step into their shoes for a minute.

If you had some relatives that were spending wildly and that had already run up $100,000 in credit card debt, would you be a co-signer on their next credit card application?

Of course not.

The recent elections in France and Greece made it abundantly clear that the populations of those two countries are rejecting austerity.

Instead, they want a return to the debt-fueled prosperity that they have always enjoyed in the past.

Unfortunately, they need German help to be able to do that.

That is why new French President Francois Hollande is pushing so hard for eurobonds.  He wants the rest of the eurozone to be able to “piggyback” on Germany’s sterling credit rating so that everyone can return to the days of wild borrowing and spending.

But Germans greatly fear what a co-mingling of eurozone debt could eventually mean.  Not only would Germany’s borrowing costs rise dramatically, but there is also a concern that the rest of the eurozone could eventually pull Germany down with them.

Austria, Finland and the Netherlands are also against eurobonds, but the key is Germany.

For now, Germany is not budging on the issue of eurobonds at all.  The following is a statement that German Chancellor Angela Merkel made during a recent speech in Berlin….

“It’s just about not spending more than you collect. It’s astonishing that this simple fact leads to such debates”

And she is right.

Why is it so controversial to insist that people not spend more than they bring in?

But this is the problem that is created when you create a false lifestyle fueled by debt that goes on for decades.  People become accustomed to that false standard of living and they throw hissy fits when that false standard of living begins to disappear.

The Germans don’t want to make great sacrifices just so the Greeks, the French and the Italians can go back to borrowing and spending wildly.

Why would the Germans want to do that?

And as a recent CNN article noted, German politicians believe that eurobonds are explicitly banned under existing EU treaties anyway….

“There is no way of introducing them under the current [EU] treaties. Indeed, there is an explicit ban on them,” one senior German official said, adding Berlin would not drop its opposition in the foreseeable future. “That’s a firm conviction which will not change in June.”

But politicians such as Hollande are complaining that austerity could seriously damage living standards throughout Europe.

And Hollande is right about that.

When you inflate your standard of living with borrowed money for many years, eventually there comes a time when you must pay a great price.

Anyone that has ever been in trouble with credit card debt knows how painful that can be.

It is shameful for the rest of Europe to be pleading and begging Germany to help them.

They should take care of themselves.

As I wrote about the other day, Greece would be much better off in the long run if it left the euro and created a new financial system based on sound financial principles.

But in the financial press all over the world there are calls for someone to come up with a “plan” to “rescue” Europe.  For example, the following is from a recent Wall Street Journal article….

There have been two main responses to the crisis: austerity, and kicking cans down roads. Austerity, in case you haven’t noticed, is so last year. It’s out. Which means that unless something else is found, some other comprehensive plan, the other main response, can kicking, is going to run out of road.

Just about everybody backed the idea of eurobonds, except for the Germans, and since they’re the ones with all the money, they’re kind of the only ones whose vote counts anyway. So, it’s time to go to plan B. Only there’s no Plan B, and there’s no time, either.

If Germany does not agree to subsidize the rest of the eurozone, will that ultimately mean that the eurozone will be forced to break up?

Probably.

And that would cause a huge amount of pain in the short-term.

But the euro never was a good idea in the first place.  It was foolish to expect a monetary union to work smoothly in the absence of fiscal and political union.

And to be honest, the entire world would be a better place with less European integration.  The EU has become a horrifying bureaucratic nightmare and it would be wonderful if the entire thing broke up.

But for now, the only thing that is in danger is the euro.

Increasingly, it is looking like Greece may be the first country to exit the euro.

This week, former Greek Prime Minister Lucas Papademos admitted that the Greek government is considering making preparations for Greece to leave the euro.

Not only that, Reuters is reporting that top officials in the eurozone are now working on “contingency plans” for a Greek exit from the euro….

Each euro zone country will have to prepare a contingency plan for the eventuality of Greece leaving the single currency, euro zone sources said on Wednesday.

Officials reached the consensus on Monday afternoon during an hour-long teleconference of the Eurogroup Working Group (EWG).

As well as confirmation from three euro zone officials, Reuters has seen a memo drawn up by one member state detailing some of the elements that euro zone countries should consider.

So obviously a Greek exit from the euro has become a very real possibility.

A recent Bloomberg article detailed how a Greek exit from the euro could play out during the 46 hours that global financial markets are closed over the weekend….

Greece may have only a 46-hour window of opportunity should it need to plot a route out of the euro.

That’s how much time the country’s leaders would probably have to enact any departure from the single currency while global markets are largely closed, from the end of trading in New York on a Friday to Monday’s market opening in Wellington, New Zealand, based on a synthesis of euro-exit scenarios from 21 economists, analysts and academics.

Over the two days, leaders would have to calm civil unrest while managing a potential sovereign default, planning a new currency, recapitalizing the banks, stemming the outflow of capital and seeking a way to pay bills once the bailout lifeline is cut. The risk is that the task would overwhelm any new government in a country that has had to be rescued twice since 2010 because it couldn’t manage its public finances.

Right now, nobody is quite sure what is going to happen next and panic is spreading throughout the European financial system.

At this point, everyone is afraid of what is going to happen if Greece is forced to start issuing drachmas again.  As CNBC is reporting, some big European corporations are already beginning to implement their own “contingency plans”….

Big tourism operators like TUI of Germany and Kuoni of Britain are demanding the addition of so-called drachma clauses to contracts with Greek hoteliers should the euro no longer be in use here. British newspapers are filled with advice columns for travelers worried about the wisdom of planning a vacation in Greece, or even Portugal and Spain, should the euro crisis worsen. Large multinational companies like Vodafone Group, Reckitt Benckiser and Diageo have taken to sweeping cash every day from euro accounts back to Britain to limit their exposure.

Sadly, this is probably only a small taste of the financial anarchy that is coming.

France is likely to keep pushing hard for the creation of eurobonds.

Germany is likely to keep fiercely resisting this.

At some point, a moment of crisis will arrive and a call will have to be made.

Will Germany give in or will political turmoil end up shattering Europe?

It will be interesting to see how all of this plays out.

11 Quotes That Show How Worried The Financial World Is About Europe Right Now

The recent elections in France and in Greece have thrown the global financial system into an uproar.  Fear and worry are everywhere and nobody is quite sure what is going to happen next.  All of the financial deals that Greece has made over the past few years may be null and void.  Nobody is going to know for sure until a new government is formed, and at this point it looks like that is not going to happen and that there will need to be new elections in June.  All of the financial deals that France has made over the past few years may be null and void as well.  New French President Francois Hollande seems determined to take France on a path away from austerity.  But can France really afford to keep spending money that it does not have?  France has already lost its AAA credit rating and French bond yields have started to move up toward dangerous territory.  And Greek politicians are delusional if they think they have any other choice other than austerity.  Without European bailout money (which they won’t get if they don’t honor their current agreements), nobody is going to want to lend Greece a dime.

And all of this talk about “austerity” is kind of silly anyway.  It isn’t as if either France or Greece was going to have a balanced budget any time soon.  Both nations were still running up huge amounts of debt even under the “austerity” budgets.

But the citizens of both nations have sent a clear message that they are not going to tolerate even a slowdown in government spending.  They want to go back to the debt-fueled prosperity of the last several decades, even if it makes their long-term financial problems a lot worse.

Unfortunately, as I mentioned earlier, Greece does not have that option.  Without the bailout money that they are scheduled to get, Greece does not have a prayer of avoiding a disorderly default.  Private investors would have to be insane to lend Greece money if the bailout deal falls apart.  Greece desperately needs the help of the EU, the ECB and the IMF and the only way they are going to get it is if they abide by the terms of the agreements that have already been reached.

The only way that Greece can avoid austerity at this point would be to leave the euro.  Nobody would want to lend money to Greece under that scenario either, but Greece could choose to print huge amounts of their own national currency if they wanted to.

The situation is different in France.  Investors are still willing to lend to France at reasonable interest rates, but if France chooses to run up huge amounts of additional debt at some point they will end up just like Greece.

What is even more important in the short-term is the crumbling of the French/German alliance on European fiscal matters.  Angela Merkel and Nicolas Sarkozy were a united front, but now Merkel and Hollande are likely to have conflict after conflict.

Instead of moving in one clear direction, the eurozone is now fractured and tensions are rising.

So what comes next?

Well, investors are not certain what comes next and that has many of them deeply concerned.

The following are 11 quotes that show how worried the financial world is about Europe right now….

#1 Tres Knippa of Kenai Capital Management: “What is going on in Europe is an absolute disaster…the risk-on trade is not the place to be. I want to be out of equities and very, very defensive because the situation in Europe just got worse after those elections.”

#2 Mark McCormick, currency strategist at Brown Brothers Harriman: “We’re going to have higher tensions, more uncertainty and most likely a weaker euro.”

#3 Nick Stamenkovic, investment strategist at RIA Capital Markets in Edinburgh: “Investors are questioning whether Greece will be a part of the single currency at the end of this year.”

#4 Jörg Asmussen, a European Central Bank executive board member: “Greece needs to be aware that there is no alternative to the agreed reform program if it wants to remain a member of the eurozone”

#5 Tristan Cooper, sovereign debt analyst at Fidelity Worldwide Investment: “A Greek eurozone exit is on the cards although the probability and timing of such an event is uncertain.”

#6 Art Cashin: “Here’s the outlook on Greece from Wall Street watering holes. If a coalition government is formed or looks to be formed, global markets may rally. Any coalition is unlikely to make progress on goals, since austerity is political suicide. There will likely be another election around June 10/17. A workable majority/plurality remains unlikely, so back to square one. Therefore, Greece will be unable to attain goals by the deadline (June 30). Lacking aid funds, pensions are suspended and government workers are laid off. Protestors take to the streets and government is forced to revert to drachma to avoid social chaos. Pass the peanuts, please.”

#7 John Noonan, Senior Forex Analyst with Thomson Reuters in Sydney: “Sentiment is very bearish, The euro is under a lot of pressure right now. I get the feeling that it’s going to be a nasty move lower for the euro finally”

#8 Kenneth S. Rogoff, a professor of economics at Harvard: “A Greek exit would underscore that there’s no realistic long-term plan for Europe, and it would lead to a chaotic endgame for the rest of the euro zone.”

#9 Chris Tinker of Libra Investment Services: “It’s a binary decision. If Greece gets itself to the point where the European administration says, ‘We can’t play this game anymore,’ that starts a domino effect”

#10 Nicolas Véron, a senior fellow at Bruegel: “France has very limited fiscal space and actually has to engage in fiscal consolidation”

#11 80-year-old Greek citizen Panagiota Makri: “I’m confused. I feel numb and confused. Only God can save us now”

All of this comes at a time when much of Europe is already descending into a new recession.  Economies all over Europe are contracting and unemployment rates are skyrocketing.  Until things start improving, there is going to continue to be a lot of civil unrest across Europe.

Meanwhile, things are not so great in the United States either.

JPMorgan Chase CEO Jamie Dimon claims that the U.S. economy is holding a “royal straight flush“, but the only part of that he got right was the “flush” part.

There are 100 million working age Americans that do not have jobs, the middle class continues to shrink, the rising cost of food and the rising cost of gas are severely stretching the budgets of millions of American families and the federal government continues to run up gigantic amounts of debt.

When Europe descends into financial chaos, the United States is not going to escape it.  The financial crisis of 2008 deeply affected the entire globe, and so will the next great financial crisis.

Let us hope that we still have a little bit more time before the next great financial crisis strikes, but things in Europe are rapidly unraveling and at some point the dominoes are going to begin to fall.

North Korea: The Most Bizarre Country On Earth Is Now Even More Unstable

A new era has arrived for North Korea and nobody in the western world really knows exactly what is going to happen next.  Kim Jong-Il is dead, and now control over the most bizarre country on earth has been handed over to 29-year-old Kim Jong-Un.  Many believe that he is even younger than that.  North Korea was already quite unstable while Kim Jong-Il was leading it, and now we have a young man that is going to be eager to “prove himself” to the North Korean hierarchy.  Unfortunately, a lot of young men under the age of 30 don’t handle fame and fortune too well, and a lot of them tend to be hot-headed.  Hopefully Kim Jong-Un will turn out to be a reformer that will open up the doors of North Korea, but he could also end up being worse than his father.  We just do not know at this point.  We know that Kim Jong-Un was educated in Switzerland as a boy, we know that he speaks French, English and German, and we know that he is reportedly a fan of the NBA.  Other than that, we just don’t know a whole lot about him.  What we do know is that Kim Jong-Un is a product of a totalitarian society that is absolutely obsessed with destroying the United States, and that is a very frightening thing.

Today, North Korea has the fourth largest army in the entire world, and we know that Kim Jong-Un was named a four-star general in 2010.  The United States has about 28,000 soldiers stationed in South Korea, but that number is absolutely dwarfed by the 1,000,000 soldiers in the North Korean army.

Most Americans do not realize this, but the Korean war never actually ended.  A ceasefire brought the military conflict to a conclusion in 1953, but there was never a peace treaty.  For nearly 60 years, the two sides have been staring each other down along the 38th parallel.

All during that time, North Korea has been arming itself to the teeth.  North Korea is a nation that is absolutely obsessed with the military and that is absolutely obsessed with destroying the United States.

Most Americans don’t spend much time thinking about North Korea, but most North Koreans are focused on the United States every single day.  We are constantly held up as the great enemy, and North Koreans are taught that one day they will defeat us.

Today, North Korea has thousands of missile batteries and the largest artillery force in the world.  If war with North Korea erupts, Seoul would be flattened within minutes.

Right now, there are approximately 24.5 million people living either in or around Seoul, and that makes it the second largest metropolitan area in the entire world.  Even if North Korea did not nuke Seoul, the devastation caused by thousands of rockets and the largest artillery force on the planet would be unimaginable.

North Korea also has a navy with more than 700 vessels, the largest submarine fleet on the entire globe and a fleet of about 1,650 aircraft.

But most importantly, North Korea has nukes.

Everyone agrees that North Korea has conducted nuclear tests and that they have an arsenal of nuclear weapons, but nobody really knows how big that arsenal is.

It is believed that the latest long-range missiles that North Korea has developed have the ability to reach the west coast of the United States, which is a very frightening thought.

But North Korea is never satisfied with where they are at.  They are always developing new weapons.

For example, there have been reports that North Korea has tested a “super EMP weapon” which would be capable of taking out most of the U.S. power grid in a single shot.

North Korea is no joke.  North Korea has the ability to take out Seoul or Tokyo at any time.  A military conflict with North Korea could plunge the world into a devastating economic collapse in just a matter of days.

Meanwhile, the United States continues to disarm.  Thanks to recent treaties that the Obama administration has signed with Russia, the size of our strategic nuclear arsenal has been reduced by over 90 percent.

That doesn’t make a whole lot of sense, but then again not much that the Obama administration does makes sense.

North Korea is a very powerful enemy and they should not be underestimated.  Unfortunately, most of our politicians seem to be clueless when it comes to foreign policy these days.

And North Korea is constantly testing us.

There were reports that North Korea test-fired two short-range missiles off its east coast on Monday.

Was this Kim Jong-Un flexing his muscles?

Was it a tribute to Kim Jong-Il?

Was it just a test-firing that was regularly scheduled?

With North Korea you just never know.

At this point, the South Korean military has been put on a state of high alert.  South Korea is hoping that the transition of power in North Korea will go smoothly, and they are certainly watching things very closely.

The North Korean media is most definitely backing Kim Jong-Un, but that doesn’t mean that Kim Jong-Un is out of the woods yet.

Mike Chinoy, a senior fellow at the U.S. China Institute, says that there may be significant challenges to the authority of Kim Jong-Un in the months ahead….

“How does somebody who’s not yet 30 win the loyalty and respect and command authority over the entrenched party apparatus, the entrenched military bureaucracy, and the senior party officials who may have been in their positions for a long time?”

That is a very good question.  Could someone in the North Korean military rise up to challenge Kim Jong-Un?  It seems unlikely, but you never know.

Meanwhile, most of the focus in North Korea is still on the death of the “dear leader”.  The passing of Kim Jong-Il has once again demonstrated why North Korea is widely considered to be the most bizarre country on earth.

The following comes from an article in the Telegraph….

State television, which delivered the shock news in a tearful announcement, aired footage from Pyongyang of hysterical North Koreans, young and old, pounding the ground in a display of abject grief.

People on the streets of the North Korean capital wailed, some kneeling on the ground or bowing repeatedly as they learned the news that their ‘Dear Leader’ had died of heart failure while carrying out official duties on a train trip.

“How could the heavens be so cruel? Please come back, general. We cannot believe you’re gone,” Hong Son Ok cried in an interview with the country’s official broadcaster, her body shaking.

Video footage of North Koreans mourning the “dear leader” is posted below….

Of course it must be remembered that if you do not mourn the “dear leader” properly, you and your entire family could get shipped off to a prison camp.

Seriously.

In North Korea, if authorities even suspect that you are not thinking the right thing, you and your entire extended family could be sent to a gulag for the rest of your life.

It is that kind of fear and repression that enabled Kim Jong-Il to maintain such tight-fisted control.

Without a doubt, Kim Jong-Il was truly bizarre.  Kim John-Il enjoyed endless luxuries while his people deeply suffered.  It has been reported that he had a collection of more than 20,000 movies, and it is said that he composed six operas.  It is also claimed that he shot 38 under par (including 11 holes-in-one) the first time he ever played golf.

But all of this leader worship started with his father, Kim Il-Sung.  It is said that hanging up pictures of Kim Il-Sung is compulsory for every household in North Korea, and many Koreans apparently believe that Kim Il-Sung actually created the world.

So yes, North Korea is very, very weird.

And North Korea is also very, very evil.

In a previous article, I discussed how Christians are treated in North Korea.  Sadly, Christians in North Korea are murdered in some of the most brutal ways imaginable.  The following is just one example….

“While Interviewee 17 was in the North Korean Army, his unit was dispatched to widen the highway between Pyongyang and the nearby port city of Nampo. They were demolishing a vacated house in Yongkang county, Yongkang district town, when in a basement between two bricks they found a Bible and a small notebook that contained 25 names, one identified as pastor, two as chon-do-sa (assistant pastors), two as elders, and 20 other names, apparently parishioners, identified by their occupations. The soldiers turned the Bible and notebook over to the local branch of Department 15 of the Korean Workers Party (KWP), but the Party officials said it was up to the military police unit, Bowisaryungbu gigwanwon, to investigate. Tracked down at their place of work through the listing of occupation in the notebook, the 25 persons were picked up without formal arrest by the military bowibu. The interviewee was not aware of any judicial procedures for those seized. In November 1996, the 25 were brought to the road construction site. Four concentric rectangular rows of spectators were assembled to watch the execution. Interviewee 17 was in the first row. The five leaders to be executed – the pastor, two assistant pastors, and two elders – were bound hand and foot and made to lie down in front of a steamroller. This steamroller was a large construction vehicle imported from Japan with a heavy, huge, and wide steel roller mounted on the front to crush and level the roadway prior to pouring concrete. The other twenty persons were held just to the side. The condemned were accused of being Kiddokyo (Protestant Christian) spies and conspiring to engage in subversive activities. Nevertheless, they were told, “If you abandon religion and serve only Kim Il Sung and Kim Jong Il, you will not be killed.” None of the five said a word. Some of the fellow parishioners assembled to watch the execution cried, screamed out, or fainted when the skulls made a popping sound as they were crushed beneath the steamroller. Interviewee 17 thought, at the time, that these church people were crazy. He thought then that religion was an “opiate,” and it was stupid for them to give up their lives for religion. He heard from the soldiers who took away the other twenty prisoners that they were being sent to a prison camp.”

Could you imagine watching your loved ones die like that?

Famine has also been a huge ongoing problem in North Korea.

There have actually been reports of cannibalism in North Korea during times of extreme famine.  A number of years ago, the Washington Post shared what one 29-year-old female defector told them about the cannibalism that she witnessed….

“When one is very hungry, one can go crazy. One woman in my town killed her 7-month-old baby, and ate the baby with another woman.”

The amazing thing is that the 29-year-old female defector did not even consider the cannibalism to be wrong….

“I can’t condemn cannibalism. Not that I wanted to eat human meat, but we were so hungry. It was common that people went to a fresh grave and dug up a body to eat meat. I witnessed a woman being questioned for cannibalism. She said it tasted good.”

So is there anyone out there that still wants to move to North Korea?

National Geographic once did an amazing documentary on what life is like inside North Korea, and if you have not seen it yet, you can view it on YouTube right here.  It is absolutely incredible that there are people on earth that are living like that.

Hopefully the rest of us can learn a lesson from them.  A totalitarian police state may make you feel a little bit “safer”, but no rational person should ever want to live in one.

The funny thing is that the North Korean people supposedly have rights.  If you can believe it, the North Korean constitution actually guarantees freedom of speech and freedom of the press.

The American people need to understand that just because the U.S. Constitution says that we have rights does not mean that we will always have them.  In fact, today our First Amendment rights are being brutally assaulted.

As I wrote about recently, the United States is becoming a little more like North Korea every single day.  If we do not stand up for our rights, eventually they will all be gone.

It has been said that the price of freedom is eternal vigilance.  Throughout history, most societies have not enjoyed the same freedoms that we enjoy today.  There always seems to be a tendency for governments to become repressive and to go down the road that North Korea has gone.

Please do not let that happen to America.

And So It Begins – The First Major European Bank Has Been Bailed Out And More Bailouts Are Coming

And so it begins.  The first major European bank bailout of 2011 has now happened.  French/Belgian banking giant Dexia has failed and both governments have pledged to participate in a rescue plan.  But Dexia will not be the last major European bank to fail.  Even now, governments all over Europe are feverishly developing plans to bail out major national banks in the event that the current financial crisis goes from bad to worse.  Instead of learning the lessons of 2008, most major European banks have continued to pile up huge mountains of debt, leverage and risk.  Now the bill for that stupidity is about to be passed on to the taxpayers of those nations.  But with most nations in Europe already drowning in debt, are bank bailouts really the right course of action?  What is it going to happen to Europe if dozens of major banks start failing and trillions of euros are needed to bail them all out?

Dexia is the first victim of the new credit crunch.  It got to the point where Dexia simply could not get access to the funding that it needed in the credit markets.

We are starting to see this all over Europe.  Nobody wants to loan much money to European banks right now because it is unclear what is going to happen next in Europe and it is uncertain which banks are stable and which are on the verge of collapse.

This is so similar to what happened back in 2008.

But Dexia is not going to be “the next Lehman Brothers” because the governments of France and Belgium are stepping in to save Dexia from collapse.

A recent article in the Financial Post described how the rescue of Dexia is likely to proceed….

Dexia will effectively be broken up, with the sale of healthier operations while toxic assets, including Greek and other peripheral euro zone government bonds, will be placed in a state-supported “bad bank.”

The details of the plan will be negotiated over the coming days, but authorities are making it clear that Dexia is not going to be allowed to collapse.  Bank of France Governor Christian Noyer is assuring everyone that Dexia is going to have access to plenty of liquidity….

“We will loan Dexia as much as it needs”

It appears that the “too big to fail” doctrine is alive and well in Europe.

Sadly, this is not the first time that Dexia has been bailed out.  France and Belgium also bailed out Dexia back in 2008.

But this was not supposed to happen.

Just three months ago, Dexia received “a clean bill of health” from regulators during European Union bank stress testing.

It just shows how credible those “stress tests” really are.

So are more European bank bailouts coming?

It certainly looks that way.

An article in the Financial Post on Tuesday stated the following….

European finance ministers agreed on Tuesday to prepare action to safeguard their banks as doubts grew about whether a planned second bailout package for debt-laden Greece would go ahead.

Of course when they talk about the need “to safeguard their banks” they are talking about those that are deemed “too big to fail”.  Just like in the United States, banks that are “too small” don’t get bailed out at all.

But western governments are very protective of the big banks.  The big banks are allowed to take gigantic risks, and if they succeed they make tons of money and if they fail then the taxpayers bail them out.

With big trouble on the horizon in Europe, authorities are already getting ready to bail out the major banks.  A Bloomberg article from last month acknowledged that the German government has been very busy getting ready to bail out their major banks in the event that a Greek default becomes a reality….

Chancellor Angela Merkel’s government is preparing plans to shore up German banks in the event that Greece fails to meet the terms of its aid package and defaults, three coalition officials said.

As you read this, there are already signs of trouble at major German banks.  For example, Deutsche Bank has just announced that it is eliminating 500 more jobs.

The fundamental problems that Europe is facing are not being solved and the financial crisis is getting progressively worse.  With each passing day, more bad financial news comes pouring in.

For example, Moody’s slashed Italy’s bond ratings by three levels on Tuesday.

A reduction of just one level is very serious business.  For Moody’s to hit Italy that hard is a really big deal.

Italian banks have also been targeted by the credit rating agencies.  The other day, S&P slashed the credit ratings of seven different Italian banks.

If Italy goes down, it is going to be an absolute nightmare.  The Italian economy absolutely dwarfs the Greek economy.  The EU has been really struggling to bail out Greece, and there is no way in the world that they would be able to bail out Italy.

So if nations such as Italy or Spain start collapsing, will the U.S. Federal Reserve step in to help bail them out?

You never know.

The sad truth is that the Federal Reserve can do pretty much whatever it wants and nobody can stop them.

As I wrote about the other day, the Federal Reserve has agreed to join with other major central banks to lend hundreds of billions of dollars to major European banks in October, November and December.

As the past few years have shown, wherever big, global banks are in trouble, the Federal Reserve is sure to step in and help.

And many big banks in Europe are definitely headed for trouble.  Right now, European banks are holding more than $4 trillion in European sovereign debt.

A lot of that debt is bad debt.  Today, troubled European nations Greece, Portugal, Ireland, Italy and Spain owe the rest of the world about 3 trillion euros combined.

That is a whole lot of debt out there, and many big banks are so leveraged that just a 5 percent reduction in the value of their holdings could wipe them out.

Hold on to your hats folks.

So what should we be watching next?

Well, Greece continues to be a huge problem.

The IMF, the European Central Bank and the European Union are very frustrated with Greece right now.

On Monday, it was revealed that Greece is not going to hit the deficit reduction targets set for it by the “troika” either this year or next year.

European officials have been particularly displeased that Greece has been getting all of this aid money and yet has not been strictly adhering to the austerity measures that they agreed to.

However, the reality is that the austerity measures that Greece has actually bothered to implement have hit the Greek economy really hard.  The more Greece reduces government spending the more the Greek economy seems to slow down.

Greek Finance Minister Evangelos Venizelos recently announced that the Greek economy is projected to shrink by 5.3% in 2011, and Greek debt continues to spiral out of control.

Meanwhile, severe economic pain continues to spark huge protests all over Greece.  Scenes of riot police firing tear gas and protesters throwing stones at police have become so common in Greece that most of us don’t even pay much attention anymore.

But all of us should pay attention to what is happening in Greece.

Eventually these kinds of economic riots will spread throughout the rest of the western world as well.

And every day Greece just seems to get closer and closer to default.

At this point, global financial markets seem to consider a Greek default to be inevitable.  The yield on 2 year Greek bonds is now over 65 percent.  The yield on 1 year Greek bonds is now over 135 percent.

Greece is toast without more bailout money.

But now major politicians all over Germany are declaring that Germany is done contributing money to the European bailout fund.

And without Germany, the rest of the eurozone is not going to be able to continue the bailouts.

So the clock is ticking.

Once the current bailout fund has dried up, the bailout game will be over.

What will happen then?

Will that be what sets off a massive financial collapse in Europe?

Could we actually see the end of the euro?

For a long time there was speculation that it would be weak nations such as Greece that would leave the euro.

But now it appears increasingly likely that if someone is going to leave the euro it might be Germany.

Most German citizens would be in favor of such a move.  One recent poll conducted for Stern magazine actually found that 54 percent of all Germans would favor leaving the euro.

But if Germany left the euro it would absolutely implode.  German economic strength is the primary thing holding the euro up at this point.

In any event, it is going to be very interesting to watch what will happen to Europe over the coming months.

Greece, Italy, Portugal and Spain are all steadily marching toward collapse.

Germany says that it is done bailing out other members of the eurozone.

Dozens of major European banks are teetering on the brink of disaster.

People get ready – a storm is coming.

Time is running out for Europe and there is no help in sight.