IMF

9 Reasons Why Spain Is A Dead Economy Walking

Barring an economic bailout of mammoth proportions, the economy of Spain is completely and totally doomed.  The socialist government of Spain is drowning in debt, unemployment is running rampant and everywhere you turn there are major economic problems.  So will Spain be the next Greece?  No.  When the economy of Spain implodes it is going to be a whole lot worse for the world economy.  The economy of Spain is more than four times the size of the economy of Greece.  Spain accounts for 11.5 percent of eurozone GDP while Greece only accounts for approximately 2.5 percent.  Spain is the 4th largest economy in the 16 nation eurozone and it is the 10th largest economy in the world.  If the economy of Spain fails it will cause a shockwave that will be felt in every corner of the globe.  In fact, there are quite a few analysts that believe if Spain defaults it would ultimately lead to the breakup of the eurozone.

So will the EU step up and bail out Spain?  Well, there are rumors that EU officials have begun work on a bailout package for Spain which is likely to run into the hundreds of billions of dollars, but on Monday the European Commission, the Spanish government and the German government all denied that the European Union was preparing a bailout for the Spanish economy.

Of course we all know that politicians don’t always tell us the truth.

So who knows what is going on over there right now.

But the reality is that the economy of Spain is not going to make it much longer without serious help, and some EU officials are already using apocalyptic language to describe what an economic collapse in Spain would mean.

For example, EU Commission President Jose Manuel Barroso recently warned that democracy could completely collapse in Greece, Spain and Portugal unless urgent action is taken to tackle the burgeoning European debt crisis.

So could democracy actually fail in those nations?

Well, considering the fact that Greece, Spain and Portugal only became democracies in the 1970s, and that all three of those countries have a history of military coups, such a scenario is not that far-fetched.

Without a doubt there would be serious public unrest in those nations if public services collapsed because their governments ran out of money.

So are there signs that the economy of Spain is about to collapse?

Well, yes, there are quite a few of them.

The following are 9 reasons why Spain is a dead economy walking….

#1) Even before this most recent crisis, unemployment in Spain was approaching Great Depression levels.  Spain now has the highest unemployment rate in the entire European Union. More than 20 percent of working age Spaniards were unemployed during the first quarter of 2010.  If people aren’t working they can’t pay taxes and they can’t provide for their families.

#2) In an effort to stimulate the economy, Spain’s socialist government has been spending unprecedented amounts of money and that skyrocketed the government budget deficit to a stunning 11.4 percent of GDP in 2009.  That is completely unsustainable by any definition.

#3) The total of all public and private debt in Spain has now reached 270 percent of GDP.

#4) The Spanish government has accumulated way more debt than it can possibly handle, and this has forced two international ratings agencies, Fitch and Standard & Poor’s, to lower Spain’s long-term sovereign credit rating.  These downgrades are making it much more expensive for Spain to finance its debt at a time when they simply can’t afford to pay more interest on their debt.

#5) There are 1.6 million unsold properties in Spain.  That is six times the level per capita in the United States.  Considering how bad the U.S. real estate market is, that statistic is incredibly alarming.

#6) The new “green economy” in Spain has been a total flop.  Socialist leaders promised that implementing hardcore restrictions on carbon emissions and forcing the nation over to a “green economy” would result in a flood of “green jobs”.  But that simply did not happen.  In fact, a leaked internal assessment produced by the government of Spain reveals that the “green economy” has been an absolute economic nightmare for that nation.  Energy prices have skyrocketed in Spain and the new “green economy” in that nation has actually lost more than two jobs for every job that it has created.  But Spain so far seems unwilling to undo all of the crazy regulations that they have implemented.

#7) Spain’s national debt is so onerous that they are now caught in a debt spiral where anything they do will harm the economy.  If they cut government expenditures in an effort to get debt under control it will devastate economic growth and crush badly needed tax revenues.  But if the Spanish government keeps borrowing money their credit rating will continue to decline and they will almost certainly default.  The truth is that the Spanish government is caught in a “no win” situation.

#8) But even now the IMF is projecting that the Spanish economy is going nowhere fast.  The International Monetary Fund says there will be no positive GDP growth in Spain until 2011, at which point it will still be below one percent.  As bleak as that forecast is, many analysts believe that it is way too optimistic considering the fact that Spain’s economy declined by about 3.6 percent in 2009 and things are rapidly getting worse.

#9) The Spanish population has gotten used to socialist handouts and they are not going to accept public sector pay cuts, budget cuts to social programs and hefty tax increases easily.  In fact, there is likely to be some very serious social unrest before all of this is said and done.  On May 21st, thousands of public sector workers took to the streets of Spain to protest the government’s austerity plan.  But that was only an appetizer.  Spain’s two main unions are calling for a major one day general strike to protest the government’s planned reforms of the country’s labor market.  The truth is that financial shock therapy does not go down very well in highly socialized nations such as Greece and Spain.  In fact, the austerity measures that Spain has been pressured to implement by the IMF have proven so unpopular that many are now projecting that Spain’s socialist government will be forced to call early elections.

So what is going to happen in Spain?

The truth is that nobody can predict for sure how things are going to play out over the coming weeks and months.

But what everyone can agree on is that the stakes are incredibly high.

Speaking at the World Economic Forum in Davos, Switzerland, world famous economist Nouriel Roubini put it this way: “If Greece goes under, that’s a problem for the eurozone. If Spain goes under, it’s a disaster.”

But right now the entire population of Spain (along with much of the rest of the world) is completely distracted by the World Cup.  As long as the Spanish team does well, that is likely to keep the Spanish population sedated.  But if the Spanish team gets knocked out of the tournament early that will put the entire Spanish population in a really, really bad mood and that could mean a really chaotic summer for the nation of Spain.

Europe’s Coming Summer Of Discontent

The summer of 2010 promises to be the most tumultuous summer in the short history of the European Union.  The sovereign debt crisis sweeping the continent threatens to cause economic and political instability on a scale not seen in Europe for decades.  The truth is that governments across the eurozone have accumulated gigantic piles of debt that simply are not sustainable.  Prior to the implementation of the euro, these European governments often “printed” their way out of messes like this, but now they can’t do that.  Now they either have to dramatically cut government expenses or they have to default.  But the austerity measures that the IMF and the ECB are pressuring these European governments to adopt are likely to have some very painful side effects.  Not only will these austerity measures cause a significant slowdown in economic growth, they are also likely to cause the same kinds of protests, strikes and riots that we saw in Greece to erupt all over Europe.

You see, most Europeans have become very accustomed to the social welfare state.  Tens of millions of Europeans aren’t about to let anyone cut their welfare payments or the wages on their cushy government jobs.  In most of the European nations that are experiencing big financial problems there are very powerful unions and labor organizations that do not want anything to do with austerity measures and that are already mobilizing.

As the IMF and the ECB continue to push austerity measures all over Europe this summer, the chaos that we witnessed in Greece could end up being repeated over and over again across the continent.  This could truly be Europe’s summer of discontent.

The following are just a few of the countries that we should be watching very carefully in the months ahead….

Spain

In many ways, the economic situation in Spain is now even worse than the economic situation in Greece.  Spain’s unemployment was already above 20 percent even before this recent crisis.  There are now 4.6 million people without jobs in Spain.  There are 1.6 million unsold properties in Spain, six times the level per capita in the United States.  Total public/private debt in Spain has reached 270 percent of GDP.

But this past week things really started to spin out of control in Spain.   Ambrose Evans-Pritchard of The Telegraph describes the current situation in Spain this way….

For Spain it has been a horrible week. The central bank seized CajaSur and imposed draconian write-down rules on banks to restore confidence. The Spanish Socialist and Workers Party (PSOE) of Jose Luis Zapatero then rammed a 5pc cut in public wages through the Cortes by a single vote, shattering consensus. The government cannot hope to pass a budget. Its own trade union base is planning a general strike.

The austerity measures that Spain has been pressured to implement have proven so unpopular in Spain that many are now projecting that Spain’s socialist government will be forced to call early elections.

Spain finds itself in a very difficult position.  They have a debt that they cannot possibly handle, the IMF and the ECB are pressuring Spain to implement austerity measures which are wildly unpopular with the public, and if Spain does implement those austerity measures it may send the Spanish economy into a downward spiral.

In addition, the fact that Fitch Ratings has stripped Spain of its AAA status has pushed Spain to the edge of financial oblivion.

A recent editorial inEl Pais spoke of the “perverse spiral” that Spain’s economy is entering….

“The Fitch note drives home the apparently unsolvable contradiction in which the Spanish economy finds itself. To maintain debt solvency Spain must squeeze public spending: yet this policy undermines the chances of recovery which itself causes further loss of confidence.”

And Spain’s very powerful labor organizations are not about to take these austerity measures sitting down.  In fact, the two largest trade unions in Spain are already calling for a general strike.

So could Spain end up being the next Greece?

France

France admitted on Sunday that keeping its top-notch credit rating would be “a stretch” without some tough budget decisions.

But French citizens are not too keen on belt-tightening.  We all remember the massive riots in France a few years ago when it was proposed the the work week should be shortened.  It certainly seems unlikely that the French will accept “tough budget decisions” without making some serious noise.

Italy

The Italian government recently approved austerity measures worth 24 billion euros for the years 2011-2012.  But the Italian public is less than thrilled about it.

In fact, Italy’s largest union has announced that it will propose to its members a general strike at the end of June to protest these measures.

Portugal

Under pressure from the IMF and the ECB, Portugal has agreed to impose fresh austerity measures that include much higher taxes and very deep budget cuts.

And the truth is that Portugal desperately needs to do something to get their finances under control.  Recent EU data shows that Portugal’s total debt is 331 percent of GDP, compared to only 224 percent for Greece.

So will the Portuguese public accept these austerity measures?

It doesn’t seem likely.

In fact, Fernando Texeira dos Santos, Portugal’s finance minister, says that he expects “violent episodes” comparable to those in Greece but insists that there is no other option.

So it promises to be a wild summer in Portugal.  The CGTP trade union federation in Portugal has promised to mobilize their members….

“Either we come up with a very strong reaction or we will be reduced to bread and water.”

Romania

They have already been rioting in the streets in Romania.

Tens of thousands of workers and pensioners recently took to the streets in Romania to protest the harsh austerity measures that the Romanian government is imposing at the request of the International Monetary Fund.

The Romanian people have been through incredibly hard times before, and they aren’t about to let the IMF and the ECB impose strict austerity measures on them without a fight.

Germany

It is being reported that Germans are bracing themselves for a “bitter” round of government budget cuts.  It seems that even Germany has some belt-tightening to do.

In addition, resentment is rising fast in Germany as the population there realizes that it is Germany that is going to be the one funding a large portion of the bailouts for these other European nations.

How long will the German people be able to control their tempers?

Ireland

The Wall Street Journal is warning that Ireland could be Europe’s next financial basket case.

Why?

Well, the Irish have gotten into a ton of debt, and they are now finding it very expensive to finance new debt.  The Irish government is now paying approximately 2.2 percentage points more than Germany is to borrow money for 10 years, while Spain (even with their economy in such a state of disaster) only has to pay 1.6 percentage points more than Germany.

But if “austerity measures” come to Ireland, how do you think the public will react?

It likely would not be pretty.

The United Kingdom

The exploding debt situation in the U.K. was a major issue in the most recent election.  David Cameron promised the voters to get the U.K.’s exploding debt situation under control.  But the coming budget cuts are likely to be incredibly painful.  In fact, Bank of England governor Mervyn King has even gone so far as to warn that public anger over the coming austerity measures will be so painful that whichever party is seen as responsible will be out of power for a generation.

But it isn’t just national governments that are in trouble in Europe.  The European Central Bank is warning that eurozone banks could face up to 195 billion euros in losses during a “second wave” of economic problems over the next 18 months.

The truth is that almost everyone is expecting the next couple of years to be very tough economically all across Europe.

But the vast majority of the European public is not going to understand the economics behind what is happening.  All most of them are going to know is that the budget reductions, tax increases and pay cuts really, really hurt and that is likely to result in a whole lot of anger.

When Europeans get really angry it isn’t pretty.  If what happened in Greece is any indication, this upcoming summer and fall could be a really wild one throughout Europe.

“Euroland, burned down. A continent on the way to bankruptcy”
-The front page of Der Spiegel, May 5th, 2010

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Why You Should Be VERY CONCERNED About The Financial Crisis In Greece

Up to this point, it seems as though most Americans have not really been too concerned about the financial meltdown that is taking place in Greece.  But they should be.  The truth is that the debt crisis we see playing out in Greece may soon repeat itself in some of the largest nations in the world such as Japan, the U.K. and even the United States.  Once upon a time, this kind of thing only happened in third world nations, but now virtually every nation on earth has a debt problem.  As the saying goes, the borrower is the servant of the lender, and so when a country like Greece gets in way, way too deep financially, it ends up having to give up a portion of its sovereignty to those controlling the purse strings.  In the case of Greece, those controlling the purse strings are the IMF and the EU.  But it just isn’t Greece that is in trouble.  Dozens of nations are in serious financial trouble and are at the mercy of those who can bail them out.  The truth is that global financial institutions like the IMF, the World Bank, the European Central Bank and the Federal Reserve are increasingly gaining power all over the globe as governments around the world continue to accumulate frightening amounts of debt.

This has been quite a week for Greece and for the other nations in Europe teetering on the edge of financial disaster.  Standard & Poor’s reduced Greek debt to “junk” status, and Spain and Portugal’s debts were also downgraded substantially.  These unprecedented steps by Standard & Poor’s have many concerned that this financial “contagion” could start spreading across all of Europe.

We’ll take a look at the “austerity measures” being forced on Greece in a moment, but first it is important to note that financial panic is already spreading to other nations in the region.

In Portugal, the government has announced that additional “austerity measures”, beyond those in the current three year plan, are expected to be implemented.  Perhaps they wouldn’t need to take such drastic steps if they hadn’t spent all of those millions constructing those shiny new soccer stadiums a few years ago.  But in any event, many analysts are now forecasting that Portugal will be the next domino to fall.

Officials in Spain are expected to announce this week that unemployment has hit 20%.  But of course any nation that implements a hardcore “cap and trade” law like the one in Spain should expect unemployment to soar into the stratosphere.  So they are just reaping what they have sown, but the fallout could end up being very painful.  Spain’s economy is approximately five times larger than Greece’s so if Spain ends up defaulting it will create a financial nightmare for all of Europe.

There are now rumors that even Italy and Ireland are in a massive amount of trouble financially.

So will the EU and the IMF end up having to bail all of them out?

Well, for now Greece is first in line.

European officials said on Friday that the Greek government, facing a rapidly deteriorating financial situation, is close to completing negotiations for assistance from the International Monetary Fund.

So Greece is going to get the money that it needs – but it comes with strings.

Greece must surrender some of its fiscal sovereignty and adopt a three year program of severe spending cuts and higher taxes.

In fact, one major Greek newspaper says that wage and job cuts for public workers will also be ordered alongside the spending cuts and tax increases to get through what they are calling “three hard years”.

You see, the truth is that Greece is a highly socialized nation.  In a population of just over 11 million people, Greece employs more than a million in the public sector.

Just think about that for a moment.

That is huge.

They get paid extremely well, and Greek civil servants also enjoy very generous pension benefits and early retirement.

Needless to say a lot of these Greek civil servants are not happy at all about the changes the IMF is forcing upon them, and they have called a general strike for May 5th.

For his part, the Greek Prime Minister, George Papandreou, is trying to convince the Greek people that these new spending cuts and tax increases are necessary to keep his nation afloat.  According to The Associated Press, Mr. Papandreou recently told the Greek Parliament the following….

“The measures we must take, which are economic measures, are necessary for the protection of our country — for our survival, for our future, so we can stand firmly on our feet.”

There are even fears that this sovereign debt crisis could spell the end for the Euro.  Back on Wednesday, the leaders of the 16 countries currently using the Euro called an emergency meeting to attempt to avert a Euro meltdown triggered by Greece’s financial collapse.

Of course the Euro is not actually going to collapse, but the fact that they all felt the need to get together and talk about this situation is quite telling.

In fact, the language used by some of the top financial authorities in the world when speaking about the Greek debt crisis is quite alarming….

Angel Gurría, head of the Organization for Economic Cooperation and Development:

“This is like Ebola. It’s threatening the stability of the financial system.”

Colin Ellis, economist at Daiwa Capital Markets:

“The time for horse-trading, prevarication and posturing is over. Arguably, the very future of the euro area is now teetering on a knife edge.”

Dominique Strauss-Kahn, head of the International Monetary Fund:

“If we don’t fix it in Greece, it may have a lot of consequences on the EU.”

But for the people of Greece, getting help with their debt means giving up their ability to determine their own affairs.  They have gotten into so much debt that now they are forced to do whatever the IMF and the EU tell them to do.  Of course there are many in Greece who are extremely upset by this as evidenced by the recent riots there….

But this is what happens when a nation allows itself to get into way too much debt.  In fact, this has been done by design in third world nations for decades.  In his extraordinary book, Confessions of an Economic Hitman, John Perkins explained how it was his job to go around the world and get third world governments to accept multibillion-dollar loans that he knew they would never be able to repay.  Of course when the time came and they could not repay the loans, the big global institutions would go in and confiscate natural resources and impose “conditions” and implement “austerity measures” similar to the ones they are currently imposing on Greece.

The alarming thing today is that it just isn’t third world nations where this game is being played anymore.  Now that they have perfected the blueprint, they are trying it out on nations like Greece.

The reality is that this is all part of the push towards globalization.  In fact, Jean-Claude Trichet, the president of the European Central Bank, emphasized the need for global coordination in financial matters during his April 26th address at the Council on Foreign Relations.

“Global coordination” sounds nice, but just like “global governance” and “global cooperation”, it is just another way of saying that we need to transfer more power and more authority to globalist institutions.

You see, whatever problem that pops up (in this instance it is the Greek debt crisis), the solution always seems to be to transfer more power to global institutions.

In fact, as a “solution” to the global financial crisis, the IMF is proposing two new taxes on financial institutions worldwide: a “financial stability contribution” which levies a small charge on financial institution balance sheets, and a “financial activities tax”, which would tax “excess profits” and bonuses.

As the nations of the world continue to get deeper in debt, and as more power and more money is transferred to unelected global institutions, the people of the world may find their lives increasingly being run by heartless bureaucrats on the other side of the globe.

For anyone who loves freedom, that is a very sobering thought.

Megabanks: The Banking Oligarchy That Controls Assets Equivalent To 60 Percent Of America’s GNP

Today financial power is being concentrated in the hands of fewer and fewer individuals.  In fact, the six biggest banks in the United States now possess assets equivalent to 60 percent of America’s gross national product.  Back in the 1990s that figure was less than 20 percent.  These six banks – Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo – literally dictate what goes on in the U.S. banking industry.  These entities are the poster children for “too big to fail”, and they donate massive amounts of cash to the campaigns of both Republicans and Democrats to ensure that they will continue to receive favorable treatment.  The vast majority of Americans have had a banking account, a credit card and/or a mortgage with one of these institutions at some point.  If they acted in concert, these six banks could literally bring down the U.S. economy overnight if they wanted to.  Together with the Federal Reserve, these six banks represent the real financial power in America.  They are the 800 pound gorilla in the room that influences nearly every major financial deal that gets done and virtually every major political decision that gets made.  As the last couple of years have demonstrated, top politicians from both parties (John McCain and Barack Obama for example) will instantly jump into action and start advocating that the U.S. government spend billions upon billions of dollars when the interests of these behemoths are threatened.  The frightening thing is that the power of these megabanks is growing at a frightening pace.  As dozens upon dozens of smaller U.S. banks are “allowed to fail”, they either go out of existence or the Feds actually encourage these smaller banks to sell themselves to one of the big sharks.  In either event, the banking power in the United States becomes further consolidated in the hands of the megabanks.

Bill Moyers recently interviewed Simon Johnson and James Kwak, the authors of a new book entitled 13 Bankers: The Wall St. Takeover and the Next Financial Meltdown.  During that interview Kwak described to Moyers just how explosive the growth of the power of these megabanks has been….

Bill Moyers: And you write that they control 60 percent of our gross national product?

James Kwak: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.

Does it alarm you that the banking elite have accumulated such a large amount of financial power?

It should.  These institutions have the power to wreck entire economies.  Just consider what happened in Greece lately.  Now, it is being alleged that the megabanks are ripping off American cities with the same kinds of predatory deals that brought down the financial system in Greece. 

And that is what these megabanks are.

They are predators.

In fact, a very revealing article in Rolling Stone described Goldman Sachs this way….

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Unfortunately, they may have actually been understating things a bit.

These megabanks have rigged the game so that the wealth of the nation is slowly transferred from us to themselves and to the international financial interests that control them.

They can make money if the markets are going up, and they can make money if the markets are going down.

For example, in a newly released email from the height of the housing crash, the CEO of Goldman Sachs bragged that his firm “made more than we lost” by betting against the housing market.

Thankfully the SEC is starting to look into the fraud that Goldman Sachs committed during this time period, but the truth is that Goldman is not likely to receive any more than a slap on the wrist for what it has done.

They are way too big, way too powerful and have too many friends in high places for them to get into any real trouble.

For example, it has come out that Barack Obama does not intend to return any of the campaign contributions that he received from Goldman Sachs.  And surely they will be glad to continue to pour big money into his political coffers.

So where does that leave the rest of us?

Well, the rest of us can expect higher taxes and a lower standard of living according to the IMF.  The IMF (which has deep connections to these megabanks) says that the party is “over” for nations that have been enjoying the good life.  In a recent article, the Washington Post summarized the message that the IMF is trying to communicate through their recent policy papers….

To keep the global economy on track, people in the United States and the rest of the developed world need to work longer before retiring, pay higher taxes and expect less from government. And the cheap imports lining the shelves of mega-chains such as Wal-Mart and Target? They need to be more expensive.

So are you ready to work longer, pay higher taxes, expect less from government and have a lower standard of living?

That is what the IMF says we are all going to be facing in the years ahead.

We are all going to financially suffer as the megabanks continue to thrive and consolidate power.

Isn’t that wonderful?

You say you don’t like that so much?

Well, good luck taking on the 800 pound gorilla.

The Chair Of The European Commission Calls For A European Economic Government

The recent economic collapse in Greece has caused a significant weakening of the Euro and has created a measure of financial panic all over Europe.  So what solutions are being put forward by the governments of Europe?  More centralization, more globalization and more power for the EU.  For example, the German and French finance ministers have formulated a draft plan that would significantly strengthen “financial policy cooperation” within the EU.  In essence, the plan would create the framework for a “European economic government” that would have substantial power over the economic decisions of member nations.  But if Brussles continues to swallow more and more economic power, where does that do to the governments of individual member nations?

The chair of the European Commission, Jean-Claude Juncker, who received the new proposal from German Finance Minister Wolfgang Schäuble and French Finance Minister Christine Lagarde is quoted as saying that some form of “European economic government” is needed to ensure that a crisis such as the one that has happened in Greece does not happen in the future….

“We need a European economic government in the sense of strengthened coordination of economic policy within the euro zone.”

It certainly seems as though almost every issue that comes up in Europe these days is an excuse for the EU to grab even more authority.  Is Brussels destined to become a blackhole that ultimately sucks in all power and authority in Europe whether anyone likes it or not?

Not that this kind of thing isn’t happening on a global level as well.

These days the IMF is constantly pushing for more power and authority over world financial affairs.

In fact, IMF chief Dominique Strauss-Kahn said on Friday that the International Monetary Fund wants new authority to supervise the global financial system.  In addition, Strauss-Kahn has been openly advocating the creation of a global reserve currency that would compete with (and ultimately replace) the U.S. dollar in global trade.

So is all of this centralization and globalization a good thing?  Is it right that the economic decisions for the planet are increasingly being made by a handful of very powerful men that we never even elected?

If we continue to hand authority to unelected bodies outside of our home countries, what will that do to our own political power?  If we do not even have the power to vote out those who are controlling our economic destinies, then how could we ever possibly hope to change things?

Those are some very important questions.  But the truth is that the powers that be are going to continue to push globalization and centralization on all of us.  It is up to you and I to tell them what we think about it.

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