After The Banksters Steal Money From Bank Accounts In Cyprus They Will Start Doing It EVERYWHERE

If The Banksters Will Steal Money From Bank Accounts In Cyprus Then They Will Do It ANYWHERECyprus is a beta test.  The banksters are trying to commit bank robbery in broad daylight, and they are eager to see if the rest of the world will let them get away with it.  Cyprus was probably chosen because it is very small (therefore nobody will care too much about it) and because there is a lot of foreign (i.e. Russian) money parked there.  The IMF and the EU could have easily bailed out Cyprus without any trouble whatsoever, but they purposely decided not to do that.  Instead, they decided that this would be a great time to test the idea of a “wealth tax”.  The government of Cyprus was given two options by the IMF and the EU – either they could confiscate money from private bank accounts or they could leave the eurozone.  Apparently this was presented as a “take it or leave it” proposition, and many are using the world “blackmail” to describe what has happened.  Sadly, this decision is going to set a very ominous precedent for the future and it is going to have ripple effects far beyond Cyprus.  After the banksters steal money from bank accounts in Cyprus they will start doing it everywhere.  If this “bank robbery” goes well, it will only be a matter of time before depositors in nations such as Greece, Italy, Spain and Portugal are asked to take “haircuts” as well.  And what will happen one day when the U.S. financial system collapses?  Will U.S. bank accounts also be hit with a “one time” wealth tax?  That is very frightening to think about.

Cyprus is a very small nation, so it is not the amount of money involved that is such a big deal.  Rather, the reason why this is all so troubling is that this “wealth tax” is shattering confidence in the European banking system.  Never before have the banksters come directly after bank accounts.

If everything goes according to plan, every bank account in Cyprus will be hit with a “one time fee” this week.  Accounts with less than 100,000 euros will be hit with a 6.75% tax, and accounts with more than 100,000 euros will be hit with a 9.9% tax.

How would you feel if something like this happened where you live?

How would you feel if the banksters suddenly demanded that you hand over 10 percent of all the money that you had in the bank?

And why would anyone want to still put money into the bank in nations such as Greece, Italy, Spain or Portugal after all of this?

One writer for Forbes has called this “probably the single most inexplicably irresponsible decision in banking supervision in the advanced world since the 1930s.”  And I would agree with that statement.  I certainly did not expect to see anything like this in Europe.  This is going to cause people to pull money out of banks all over the continent.  If I was living in Europe (and especially if I was living in one of the more financially-troubled countries) that is exactly what I would be doing.

The bank runs that we witnessed in Cyprus over the weekend may just be a preview of what is coming.  When this “wealth tax” was announced, it triggered a run on the ATMs and many of them ran out of cash very rapidly.  A bank holiday was declared for Monday, and all electronic transfers of money were banned.

Needless to say, the people of Cyprus were not too pleased about all of this.  In fact, one very angry man actually parked his bulldozer outside of one bank branch and threatened to physically bulldoze his way inside.

But this robbery by the banksters has not been completed yet.  First, the Cypriot Parliament must approve the new law authorizing this wealth confiscation on Monday.  If it is approved, then the actually wealth confiscation will take place on Tuesday morning.

According to Reuters, the new president of Cyprus is warning that if the bank account tax is not approved the two largest banks in Cyprus will collapse and there will be complete and total financial chaos in his country…

President Nicos Anastasiades, elected three weeks ago with a pledge to negotiate a swift bailout, said refusal to agree to terms would have led to the collapse of the two largest banks.

“On Tuesday … We would either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis,” Anastasiades said in written statement.

In several statements since his election, he had previously categorically ruled out a deposit haircut.

The fact that the new president had previously ruled out any kind of a wealth tax has a lot of people very, very upset.  They feel like they were flat out lied to

“I’m furious,” said Chris Drake, a former Middle East correspondent for the BBC who lives in Cyprus. “There were plenty of opportunities to take our money out; we didn’t because we were promised it was a red line which would not be crossed.”

But apparently the wealth confiscation could actually have been far worse.  According to one report, the IMF and the EU were originally demanding a 40% wealth tax on bank account holders in Cyprus…

As the President of Cyprus proclaims  to his people that “we’ should all take responsibility as his historic decision will “lead to the permanent rescue of the economy,” it appears that the settled-upon 9.9% haircut is a ‘good deal’ compared to the stunning 40% of total deposits that Germany’s FinMin Schaeuble and the IMF demanded.

Could you imagine?

How would you feel if you woke up someday and 40% of all your money had been taken out of your bank accounts?

At this point, there is still some doubt about whether this plan will actually be adopted or not.

Right now the new president of Cyprus does not have the votes that he needs, but you can be sure that there is some high level arm twisting going on.

Originally the vote was supposed to happen on Sunday, but it was delayed until Monday to allow for some extra “persuading” to be done.

And of course the people of Cyprus are overwhelmingly against this wealth tax.  In fact, one poll found that 71 percent of the entire population of Cyprus wants this plan to be voted down.

The funny thing is that Cyprus is not even in that bad of shape.

The unemployment rate is around 12 percent, but in other European nations such as Greece and Spain the unemployment rate is more than double that.

Cyprus has a debt to GDP ratio of about 87 percent, but the United States has a debt to GDP ratio of well over 100 percent.

So if they will go directly after bank accounts in Cyprus, what will stop them from going after bank accounts in larger nations when the time comes?

In the final analysis, this is a game changer.  No longer will any bank account in the western world be considered to be 100 percent safe.

Trust is a funny thing.  It takes a long time to build, but it can be destroyed in a single moment.

Trust in European banks has now been severely damaged, and that damage is not going to be undone any time soon.

A recent blog post by the CEO of Saxo Bank, Lars Christensen, did a great job of explaining how incredibly damaging this move by the IMF and the EU truly is…

This is a breach of fundamental property rights, dictated to a small country by foreign powers and it must make every bank depositor in Europe shiver. Although the representatives at the bailout press conference tried to present this as a one-off, they were not willing to rule out similar measures elsewhere – not that it would have mattered much as the trust is gone anyway. It is now difficult to expect any kind of limitation to what measures the Troika and EU might take when the crisis really starts to bite.

if you can do this once, you can do it again. if you can confiscate 10 percent of a bank customer’s money, you can confiscate 25, 50 or even 100 percent. I now believe we will see worse as the panic increases, with politicians desperately trying to keep the EUR alive.

Depositors in other prospective bailout countries must be running scared – is it safe to keep money in an Italian, Spanish or Greek bank any more? I dont know, must be the answer. Is it prudent to take the risk? You decide. I fear this will lead to massive capital outflows from weak Eurozone countries, just about the last thing they need right now.

This is the biggest moment that we have witnessed since the beginning of the European financial crisis.

Financial authorities in Europe could try to calm nerves by at least pretending that this will never happen again in any other country, but so far  they are refusing to do that

Jeroen Dijsselbloem, president of the group of euro-area ministers, on Saturday declined to rule out taxes on depositors in countries beyond Cyprus, although he said such a measure was not currently being considered.

Such a measure is “not currently being considered” for other members of the eurozone?

Yeah, that sure is going to make people feel a lot more confident in what is coming next.

I have insisted over and over that the next wave of the economic collapse would originate in Europe, and we may have just witnessed the decision that will cause the dominoes to start to fall.

The banksters have sent a very clear message.  When the chips are down, they are going to come after YOUR money.

So what do you think about the bank robbery that is taking place in Cyprus?  Please feel free to post a comment with your thoughts below…

Bank Robbery In Progress - Photo by PAVA

17 Signs That A Full-Blown Economic Depression Is Raging In Southern Europe – Is The U.S. Next?

17 Signs That A Full-Blown Economic Depression Is Raging In Southern Europe - Photo by GgiaWhen you get into too much debt, eventually really bad things start to happen.  This is a very painful lesson that southern Europe is learning right now, and it is a lesson that the United States will soon learn as well.  It simply is not possible to live way beyond your means forever.  You can do it for a while though, and politicians in the U.S. and in Europe keep trying to kick the can down the road and extend the party, but the truth is that debt is a very cruel master and at some point it inevitably catches up with you.  And when it catches up with you, the results can be absolutely devastating.  Greece, Italy, Spain and Portugal all tried to just slow down the rate at which their government debts were increasing, and look at what happened to their economies.  In each case, GDP is shrinking, unemployment is skyrocketing, credit is freezing up and manufacturing is declining.  And you know what?  None of those countries has even gotten close to a balanced budget yet.  They are all still going into even more debt.  Just imagine what would happen if they actually tried to only spend the money that they brought in?

I have always said that the next wave of the economic collapse would start in Europe and that is exactly what is happening.  So keep watching Europe.  What is happening to them will eventually happen to us.

The following are 17 signs that a full-blown economic depression is raging in southern Europe…

#1 The Italian economy is in the midst of a horrifying “credit crunch” that is causing thousands of companies to go bankrupt…

Confindustria, the business federation, said 29pc of Italian firms cannot meet “operational expenses” and are starved of liquidity. A “third phase of the credit crunch” is underway that matches the shocks in 2008-2009 and again in 2011.

In a research report the group said the economy was caught in a “vicious circle” where banks are too frightened to lend, driving more companies over the edge. A thousand are going bankrupt every day.

#2 During the 4th quarter of 2012, the unemployment rate in Greece was 26.4 percent.  That was 2.6 percent higher than the third quarter of 2012, and it was 5.7 percent higher than the fourth quarter of 2011.

#3 During the 4th quarter of 2012, the youth unemployment rate in Greece was 57.8 percent.

#4 The unemployment rate in Spain has reached 26 percent.

#5 In Spain there are 107 unemployed workers for every available job.

#6 The unemployment rate in Italy is now 11.7 percent.  That is the highest that it has been since Italy joined the euro.

#7 The youth unemployment rate in Italy has risen to a new all-time record high of 38.7 percent.

#8 Unemployment in the eurozone as a whole has reached a new all-time high of 11.9 percent.

#9 Italy’s economy is starting to shrink at a frightening pace

Data from Italy’s national statistics institute ISTAT showed that the country’s economy shrank by 0.9pc in the fourth quarter of last year and gross domestic product was down a revised 2.8pc year-on-year.

#10 The Greek economy is contracting even faster than the Italian economy is…

Greece also sank further into recession during the fourth quarter of 2012, with figures on Monday showing the economy contracted by 5.7pc year-on-year.

#11 Overall, the Greek economy has contracted by more than 20 percent since 2008.

#12 Manufacturing activity is declining just about everywhere in Europe except for Germany

Research group Markit said its index of activity in UK manufacturing – where 50 is the cut off between growth and decline – sank from 50.5 in January to 47.9 in February. It left Britain on the brink of a third recession in five years after the economy shrank by 0.3 per cent in the final quarter of 2012.

Chris Williamson, chief economist at Markit, said: ‘This represents a major setback to hopes that the UK economy can return to growth in the first quarter and avoid a triple-dip recession.’

The eurozone manufacturing index also read 47.9. Germany scored 50.3 but Spain hit 46.8, Italy 45.8 and France 43.9.

#13 The percentage of bad loans in Italian banks has risen to 12.2 percent.  Back in 2007, that number was sitting at just 4.5 percent.

#14 Bank deposits experienced significant declines all over Europe during the month of January.

#15 Private bond default rates are soaring all over southern Europe…

S&P said the default rate for Italian non-investment grade bonds jumped to 9.5pc last year from 5.7pc in 2012 as local banks shut off funding. It was even worse in Spain, doubling to 14.3pc.

The default rate in France rocketed from 0.8pc to 8.7pc, the latest in a blizzard of bad news from the country as the delayed effects of tax rises, fiscal tightening, and the strong euro do their worst.

#16 Lars Feld, a key economic adviser to German Chancellor Angela Merkel, recently said the following

“The sustainability of Italian public finances is in jeopardy. The euro crisis will therefore return shortly with a vengeance.”

#17 Things have gotten so bad in Greece that the Greek government plans to sell off 28 state-owned buildings – including the main police headquarters in Athens.

One of the few politicians in Europe that actually understands what is happening in Europe is Nigel Farage.  A video of one of his recent rants is posted below.  Farage believes that “the Eurozone has been a complete economic disaster” and that the worst is yet to come…

Most people believe that the eurozone has been “saved”, but that is not even close to the truth.

In fact, it becomes more likely that we will see the eurozone break up with each passing day.

So who would leave first?

Well, recently there have been rumblings among some German politicians that Greece should be the first to leave.  The following is from a recent Reuters article

Greece remains the biggest risk for the euro zone despite a calming of its economic and political crisis and may still have to leave the common currency, a senior conservative ally of German Chancellor Angela Merkel said.

But there is also a chance that Germany could eventually be the first nation that decides to leave the euro.  In fact, a new political party is forming in Germany that is committed to getting Germany out of the euro.  The following is a brief excerpt from a recent article by Ambrose Evans-Pritchard

A new party led by economists, jurists, and Christian Democrat rebels will kick off this week, calling for the break-up of monetary union before it can do any more damage.

“An end to this euro,” is the first line on the webpage of Alternative für Deutschland (AfD). “The introduction of the euro has proved to be a fatal mistake, that threatens the welfare of us all. The old parties are used up. They stubbornly refuse to admit their mistakes.”

They propose German withdrawl from EMU and return to the D-Mark, or a breakaway currency with the Dutch, Austrians, Finns, and like-minded nations. The French are not among them. The borders run along the ancient line of cleavage dividing Latins from Germanic tribes.

However this all plays out, the reality is that things are about to get much more interesting in Europe.

No debt bubble lasts forever.  The Europeans are finding that out right now, and the U.S. won’t be too far behind.

But for the moment, most Americans assume that everything is going to be okay because the Dow keeps setting new all-time record highs.

Well, enjoy this little bubble of debt-fueled false prosperity while you can, because it won’t last for long.

A massive wake up call is coming, and it will be exceedingly painful for those that are not ready for it.

Greek Economic Riot - Photo by Ggia

Will Italy Be The Spark That Sets Off Financial Armageddon In Europe?

Will Italy Be The Spark That Sets Off Financial Armageddon In EuropeIs the financial collapse of Italy going to be the final blow that breaks the back of Europe financially?  Most people don’t realize this, but Italy is actually the third largest debtor in the entire world after the United States and Japan.  Italy currently has a debt to GDP ratio of more than 120 percent, and Italy has a bigger national debt than anyone else in Europe does.  That is why it is such a big deal that Italian voters have just overwhelmingly rejected austerity.  The political parties led by anti-austerity candidates Silvio Berlusconi and Beppe Grillo did far better than anticipated.  When you combine their totals, they got more than 50 percent of the vote.  Italian voters have seen what austerity has done to Greece and Spain and they want no part of it.  Unfortunately for Italian voters, it has been the promise of austerity that has kept the Italian financial system stable in recent months.  Now that Italian voters have clearly rejected austerity, investors are fearing that austerity programs all over Europe may start falling apart.  This is creating quite a bit of panic in European financial markets right now.  On Tuesday, Italian stocks had their worst day in 10 months, Italian bond yields rose by the most that we have seen in 19 months, and the stocks of the two largest banks in Italy both fell by more than 8 percent.  Italy is already experiencing its fourth recession since 2001, and unemployment has been steadily rising.  If Italy is now “ungovernable”, as many are saying, then what does that mean for the future of Italy?  Will Italy be the spark that sets off financial armageddon in Europe?

All of Europe was totally shocked by the election results in Italy.  As you can see from the following excerpt from a Bloomberg article, the vote was very divided and the anti-austerity parties did much better than had been projected…

The results showed pre-election favorite Pier Luigi Bersani won the lower house with 29.5 percent, less than a half a percentage point ahead of Silvio Berlusconi, the ex-premier fighting a tax-fraud conviction. Beppe Grillo, a former comedian, got 25.6 percent, while Monti scored 10.6 percent. Bersani and his allies got 31.6 percent of votes in the Senate, compared with 30.7 percent for Berlusconi and 23.79 percent for Grillo, according to final figures from the Interior Ministry.

So what do those election results mean for Italy and for the rest of Europe?

Right now, there is a lot of panic about those results.  There is fear that what just happened in Italy could result in a rejection of austerity all over Europe

“I think the election results (or lack thereof) are a negative for the euro, which will likely keep the currency pressured for some time,” Omer Esiner, chief market analyst for Commonwealth Foreign Exchange, told me. But it’s not just the political uncertainty in Italy, he adds. “The shocking gains made by anti-establishment parties in Italy signal a broad-based frustration with austerity among voters and a decisive rejection of the policies pushed by Germany in nations across the euro zone’s periphery. That theme revives unresolved debt crisis issues and could threaten the continuity of reforms across other countries in the euro zone.”

And the financial markets have clearly interpreted the election results in Europe as a very bad sign.  Zero Hedge summarized some of the bad news out of Europe that we saw on Tuesday…

Swiss 2Y rates turned negative once again for the first time in a month; EURUSD relatively flatlined around 1.3050 (250 pips lower than pre-Italy); Europe’s VIX exploded to almost 26% (from under 19% yesterday); and 3-month EUR-USD basis swaps plunged to their most liquidity-demanding level since 12/28. Spain and Italy (and Portugal) were the most hurt in bonds today as 2Y Italian spreads broke back above 200bps (surging over 50bps casting doubt on OMT support) and 3Y Spain yields broke above 3% once again. The Italian equity market suffered its equal biggest drop in 6 months falling back to 10 week lows (and down 14% from its end-Jan highs). Italian bond yields (and spreads) smashed higher – the biggest jump in 19 months as BTP futures volume exploded in the last two days.

Not that things in Europe were going well before all this.

In fact, the UK was just stripped of its prized AAA credit rating.  That was huge news.

And check out some of the other things that have been going on in the rest of Europe

In Spain, a major real estate company, Reyal Urbis, collapsed last week, leaving already battered banks on the hook for millions of euros in losses. Meanwhile, the government faces a corruption scandal and a steady stream of anti-austerity demonstrations. Thousands of people took to the streets again on Saturday, protesting deep cuts to health and other services, as well as hefty bank bailouts.

Life is no better in a large swath of the broader EU. In Britain, Moody’s cited the continuing economic weakness and the resulting risks to the government’s tight fiscal policy for its rating cut. In Bulgaria, where the government fell last week and the economy is in a shambles, rightists who joined mass demonstrations across the country burned a European Union flag and waved anti-EU banners. Other austerity-minded governments in the EU face similar murky political futures.

At this point, Europe is a complete and total economic mess and things are rapidly getting worse.

And that is really bad news because Europe is already in the midst of a recession.  In fact, according to the BBC, the recession in the eurozone got even deeper during the fourth quarter of 2012…

The eurozone recession deepened in the final three months of 2012, official figures show.

The economy of the 17 nations in the euro shrank by 0.6% in the fourth quarter, which was worse than forecast.

It is the sharpest contraction since the beginning of 2009 and marks the first time the region failed to grow in any quarter during a calendar year.

But this is just the beginning.

The truth is that government debt is not even the greatest danger that Europe is facing.  In reality, a collapse of the European banking system is of much greater concern.

Why is that?

Well, how would you feel if you woke up someday and every penny that you had in the bank was gone?

In the U.S. we don’t have to worry about that so much because all deposits are insured by the FDIC, but in many European countries things work much differently.

For example, just check out what Graham Summers recently had to say about the banking system in Spain…

It’s a little known fact about the Spanish crisis is that when the Spanish Government merges troubled banks, it typically swaps out depositors’ savings for shares in the new bank.

So… when the newly formed bank goes bust, “poof” your savings are GONE. Not gone as in some Spanish version of the FDIC will eventually get you your money, but gone as in gone forever (see the above article for proof).

This is why Bankia’s collapse is so significant: in one move, former depositors at seven banks just lost virtually everything.

And this in a nutshell is Europe’s financial system today: a totally insolvent sewer of garbage debt, run by corrupt career politicians who have no clue how to fix it or their economies… and which results in a big fat ZERO for those who are nuts enough to invest in it.

Be warned. There are many many more Bankias coming to light in the coming months. So if you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We’re literally at most a few months, and very likely just a few weeks from Europe’s banks imploding, potentially taking down the financial system with them. Think I’m joking? The Fed is pumping hundreds of BILLIONS of dollars into EU banks right now trying to stop this from happening.

Like Graham Summers, I am extremely concerned about the European banking system.  Europe actually has a much larger banking system than the U.S. does, and if the European banking system implodes that is going to send huge shockwaves to the farthest corners of the globe.

But if you want to believe that the “experts” in Europe and in the United States have “everything under control”, then you might as well stop reading now.

After all, they are very highly educated and they know what they are doing, right?

But if you want to listen to some common sense, you might want to check out this very ominous warning from Karl Denninger

I hope you’re ready.

Congress has wasted the time it was given by the Europeans getting things “temporarily” under control.  But they didn’t actually get anything under control, as the Italian elections just showed.

Now, with the budget over there at risk of being abandoned, and fiscal restraint being abandoned (note: exactly what the US has been doing) the markets are recognizing exactly the risk that never in fact went away over the last couple of years.

It was hidden by lies, just as it has been hidden by lies here.

Bernanke’s machinations and other games “gave” the Congress four years to do the right thing.  They didn’t, because that same “gift” also destroyed all market signals of urgency.

As such you have people like Krugman and others claiming that it’s all ok and that we can spend with wild abandon, taking our fiscal medicine never.

They were wrong.  Congress was wrong.  The Republicans were wrong, the Democrats were wrong, and the Administration was wrong.

Congress is out of time; as I noted the deficit spending must stop now, irrespective of the fact that it will cause significant economic damage.

For the past couple of years, authorities in the U.S. and in Europe have been trying to delay the coming crisis by kicking the can down the road.

By doing so, they have been making the eventual collapse even worse.

And now time is running out.

I hope that you are ready.

Armageddon

Watch The Financial Markets In Europe

Watch The Financial Markets In EuropeIs the financial system of Europe on the verge of a meltdown?  I have always maintained that the next wave of the economic crisis would begin in Europe, and right now the situation in Europe is unraveling at a frightening pace.  On Monday, European stocks had their worst day in over six months, and over the past four days we have seen the EUR/USD decline by the most that it has in nearly seven months.  Meanwhile, scandals are erupting all over the continent.  A political scandal in Spain, a derivatives scandal in Italy and banking scandals all over the eurozone are seriously shaking confidence in the system.  If things move much farther in a negative direction, we could be facing a full-blown financial crisis in Europe very rapidly.  So watch the financial markets in Europe very carefully.  Yes, most Americans tend to ignore Europe because they are convinced that the U.S. is “the center of the universe”, but the truth is that Europe actually has a bigger population than we do, they have a bigger economy then we do, and they have a much larger banking system than we do.  The global financial system is more integrated today than it ever has been before, and if there is a major stock market crash in Europe it is going to deeply affect the United States and the rest of the globe as well.  So pay close attention to what is going on in Europe, because events over there could spark a chain reaction that would have very serious implications for every man, woman and child on the planet.

As I noted above, European markets started off the week very badly and things have certainly not improved since then.  The following is how Zero Hedge summarized what happened on Thursday…

EuroStoxx (Europe’s Dow) closed today -1% for 2013. France, Germany, and Spain are all lower on the year now. Italy, following ENI’s CEO fraud, collapsed almost 3% from the US day-session open, leaving it up less than 1% for the year. Just as we argued, credit markets have been warning that all is not well and today’s afternoon free-fall begins the catch-down.

In addition, the euro has been dropping like a rock all of a sudden.  Just check out this chart which shows what happened to the euro on Thursday.  It is very rare to see the euro move that dramatically.

So what is causing all of this?

Well, we already know that the economic fundamentals in Europe are absolutely horrible.  Unemployment in the eurozone is at a record high, and the unemployment rates in both Greece and Spain are over 26 percent.  Those are depression-level numbers.

But up until now there had still been a tremendous amount of confidence in the European financial system.  But now that confidence is being shaken by a whole host of scandals.

In recent days, a number of major banking scandals have begun to emerge all over Europe.  Just check out this article which summarizes many of them.

One of the worst banking scandals is in Italy.  A horrible derivatives scandal has pushed the third largest bank in Italy to the verge of collapse

Monte dei Paschi di Siena (BMPS.MI), Italy’s third biggest lender, said on Wednesday losses linked to three problematic derivative trades totaled 730 million euros ($988.3 million) as it sought to draw a line under a scandal over risky financial transactions.

There is that word “derivative” that I keep telling people to watch for.  Of course this is not the big “derivatives panic” that I have been talking about, but it is an example of how these toxic financial instruments can bring down even the biggest banks.  Monte dei Paschi is the oldest bank in the world, and now the only way it is able to survive is with government bailouts.

Another big scandal that is shaking up Europe right now is happening over in Spain.  It is being alleged that Spanish Prime Minister Mariano Rajoy and other members of his party have been receiving illegal cash payments.  The following summary of the scandal comes from a recent Bloomberg article

On Jan. 31, the Spanish newspaper El Pais published copies of what it said were ledgers from secret accounts held by Luis Barcenas, the former treasurer of the ruling People’s Party, which revealed the existence of a party slush fund. The newspaper said 7.5 million euros in corporate donations were channeled into the fund and allegedly doled out from 1997 to 2009 to senior party members, including Rajoy.

That doesn’t sound good at all.

So what is the truth?

Could Rajoy actually be innocent?

Well, at this point most of the population of Spain does not believe that is the case.  Just check out the following poll numbers from the Bloomberg article quoted above…

According to the Metroscopia poll, 76 percent of Spaniards don’t believe the People’s Party’s denials of the slush-fund allegations. Even more damning, 58 percent of the party’s supporters think it’s lying. All of the Spanish businessmen with whom I discussed the latest scandal expect it to get worse before it gets better. Their assumption that there are more skeletons in the government’s closet indicates what little trust they have in their leaders.

Meanwhile, the underlying economic fundamentals in Europe just continue to get worse.  One of the biggest concerns right now is France.  Just check out this excerpt from a recent report by Phoenix Capital Research

The house of cards that is Europe is close to collapsing as those widely held responsible for solving the Crisis (Prime Ministers, Treasurers and ECB head Mario Draghi) have all been recently implicated in corruption scandals.

Those EU leaders who have yet to be implicated in scandals are not faring much better than their more corrupt counterparts. In France, socialist Prime Minister Francois Hollande, has proven yet again that socialism doesn’t work by chasing after the wealthy and trying to grow France’s public sector… when the public sector already accounts for 56% of French employment.

France was already suffering from a lack of competitiveness. Now that wealthy businesspeople are fleeing the country (meaning investment will dry up), the economy has begun to positively implode.

As the report goes on to mention, over the past few months the economic numbers coming out of France have been absolutely frightful

Auto sales for 2012 fell 13% from those of 2011. Sales of existing homes outside of Paris fell 20% year over year for the third quarter of 2012. New home sales fell 25%. Even the high-end real estate markets are collapsing with sales for apartments in Paris that cost over €2 million collapsing an incredible 42% in 2012.

Today, the jobless rate in France is at a 15-year high, and industrial production is headed into the toilet.  The wealthy are fleeing France in droves because of the recent tax increases, and the nation is absolutely drowning in debt.  Even the French jobs minister recently admitted that France is essentially “bankrupt” at this point…

France’s government was plunged into an embarrassing row yesterday after a minister said the country was ‘totally bankrupt’.

Employment secretary Michel Sapin said cuts were needed to put the damaged economy back on track.

‘There is a state but it is a totally bankrupt state,’ he said.

So what does all of this mean?

It means that the crisis in Europe is just beginning.  Things are going to be getting a lot worse.

Perhaps that is one reason why corporate insiders are dumping so much stock right now as I noted in my article yesterday entitled “Do Wall Street Insiders Expect Something Really BIG To Happen Very Soon?”  There are a whole host of signs that both the United States and Europe are heading for recession, and a lot of financial experts are warning that stocks are way overdue for a “correction”.

For example, Blackstone’s Byron Wien told CNBC the other day that he expects the S&P 500 to drop by 200 points during the first half of 2013.

Seabreeze Partners portfolio manager Doug Kass recently told CNBC that what is happening right now in the financial markets very much reminds him of the stock market crash of 1987…

“I’m getting the ‘summer of 1987 feeling’ in the U.S. equity market,” Kass told CNBC, “which means we’re headed for a sharp fall.”

Toward the end of 2012 and at the very beginning of 2013 we saw markets both in the U.S. and in Europe move up steadily even though the underlying economic fundamentals did not justify such a move.

In many ways, that move up reminded me of the “head fakes” that we have seen prior to many of the largest “market corrections” of the past.  Often financial markets are at their most “euphoric” just before a crash hits.

So get ready.

Even if you don’t have a penny in the financial markets, now is the time to prepare for what is ahead.

We all need to learn from what Europe is going through right now.  In Greece, formerly middle class citizens are now trampling one another for food.  We all need to prepare financially, mentally, emotionally, spiritually and physically so that we can weather the economic storm that is coming.

Most Americans are accustomed to living paycheck to paycheck and being constantly up to their eyeballs in debt, but that is incredibly foolish.  Even in the animal kingdom, animals work hard during the warm months to prepare for the winter months.  Even so, we should all be working very hard to prepare during prosperous times so that we will have something stored up for the lean years that are coming.

Unfortunately, if events in Europe are any indication, we may be rapidly running out of time.

Time Is Running Out

The Sovereign Debt Bubble Will Continue To Expand Until – BANG – The System Implodes

The Sovereign Debt Bubble Will Continue To Expand Until - BANG - The System Implodes - Photo by Jeff KubinaWhy are so many politicians around the world declaring that the debt crisis is “over” when debt to GDP ratios all over the planet continue to skyrocket?  The global economy has never seen anything like the sovereign debt bubble that we are experiencing today.  The United States, Japan, and nearly every major nation in Europe are absolutely drowning in debt.  We have heard a lot about “austerity” over in Europe in recent years, but debt to GDP ratios continue to rise in Greece, Spain, Italy, Ireland and Portugal.  In general, most economists consider a debt to GDP ratio of 100% to be a “danger level”, and most of the economies of the western world have either already surpassed that level or are rapidly approaching it.  Of course the biggest debt offender of all in many ways is the United States.  The U.S. debt to GDP ratio has risen from 66.6 percent to 103 percent since 2007, and the U.S. government accumulated more new debt during Barack Obama’s first term than it did under the first 42 U.S. presidents combined.  This insane sovereign debt bubble will continue to expand until a day of reckoning arrives and the system implodes.  Nobody knows exactly when that moment will be reached, but without a doubt it is coming.

But if you listen to the mainstream media in the United States, you would be tempted to think that this giant bubble of debt is not much of a concern at all.  For example, in a recent article in the Washington Post entitled “The case for deficit optimism“, Ezra Klein wrote the following…

“Here’s a secret: For all the sound and fury, Washington’s actually making real progress on debt.”

How many times have we heard that before?

About a decade ago, government officials were projecting that we would be swimming in gigantic government surpluses by now.

Instead, we are running trillion dollar deficits.

But right now there is a lot of optimism about the economy.  The stock market recently hit a 5 year high and the business community is loving all of the false prosperity that all of this debt is buying us.

Even Warren Buffett does not really seem concerned about the exploding U.S. government debt.  He recently made the following statement

“It is not a good thing to have it going up in relation to GDP.  That should be stabilized. But the debt itself is not a problem.”

Oh really?

A debt of 16 trillion dollars “is not a problem”?

Perhaps we should all run our finances that way.

Why don’t we all go out and open up 20 different credit cards, run them all up to the max, and then tell the credit card companies that we can’t pay them back but that it “is not a problem”.

Of course real life does not work that way.

The truth is that government debt is becoming a monstrous problem all over the globe.  Just check out how debt to GDP ratios all over the planet have grown over the past five years

United States

Debt to GDP ratio in 2007: 66.6 percent

Debt to GDP ratio in 2012: 103 percent

United Kingdom

Debt to GDP ratio in 2007: 43.4 percent

Debt to GDP ratio in 2012: 85.0 percent

France

Debt to GDP ratio in 2007: 63.7 percent

Debt to GDP ratio in 2012: 86 percent

Germany

Debt to GDP ratio in 2007: 67.6 percent

Debt to GDP ratio in 2012: 80.5 percent

Spain

Debt to GDP ratio in 2007: 39.6 percent

Debt to GDP ratio in 2012: 69.3 percent

Ireland

Debt to GDP ratio in 2007: 24.8 percent

Debt to GDP ratio in 2012: 106.4 percent

Portugal

Debt to GDP ratio in 2007: 63.9 percent

Debt to GDP ratio in 2012: 108.1 percent

Italy

Debt to GDP ratio in 2007: 106.6 percent

Debt to GDP ratio in 2012: 120.7 percent

Greece

Debt to GDP ratio in 2007: 106.1 percent

Debt to GDP ratio in 2012: 170.6 percent

The Eurozone As A Whole

Debt to GDP ratio in 2007: 68.4 percent

Debt to GDP ratio in 2012: 87.3 percent

Japan

Debt to GDP ratio in 2007: 172.1 percent

Debt to GDP ratio in 2012: 211.7 percent

So how does all of this end?

Well, it is going to be messy, but it is very difficult to say exactly when the system will collapse under the weight of too much debt.  Some nations, such as Japan, are able to handle very high debt loads because they have a very high level of domestic saving.  Up to this point, an astounding 95 percent of all Japanese government bonds have been purchased domestically.  But other nations collapse under the weight of government debt even before they reach a debt to GDP ratio of 100%.  The following is an excerpt from a recent Congressional Research Service report

It is hard to predict at what point bond holders would deem it to be unsustainable. A few other advanced economies have debt-to-GDP ratios higher than that of the United States. Some of those countries in Europe have recently seen their financing costs rise to the point that they are unable to finance their deficits solely through private markets. But Japan has the highest debt-to-GDP ratio of any advanced economy, and it has continued to be able to finance its debt at extremely low costs.

When a government runs up massive amounts of debt, it is playing with fire.  You can pile up mountains of government debt for a while, but eventually it catches up with you.

Over the past 10 years, the U.S. national debt has grown by an average of 9.3 percent per year, but the overall U.S. economy has only grown by an average of just 1.8 percent per year.  That is unsustainable by definition.

There is going to be a tremendous price to pay for the debt binge that the U.S. government has indulged in over the past decade.  During Barack Obama’s first term, the amount of new debt accumulated by the federal government breaks down to about $50,521 for every single household in the United States.  That is utter insanity.

If you can believe it, we have accumulated more new government debt under Obama than we did from the inauguration of George Washington to the end of the Clinton administration.

And most Americans realize that something is seriously wrong.  One recent poll found that only 34 percent of all Americans believe that the country is heading in the right direction, and 60 percent of all Americans believe that the country is heading in the wrong direction.

If we keep piling up so much debt, at some point a moment of great crisis will arrive.  When that moment arrives, we could see havoc throughout the entire global financial system.  For instance, most people don’t really understand the key role that U.S. Treasuries play in the derivatives market.  The following is from a recent article posted on Zero Hedge

This time around, things will be far worse if nothing is solved. If the US loses another AAA rating, then the financial markets could face systemic risk. The reason for this is that US Treasuries are one of the senior most forms of collateral used by the banks to backstop the $600+ trillion derivatives market.

As any trader who trades on margin can tell you, when the value of your collateral is called into question, those on the other side of the trade come looking for you to put up more capital on your trades. This can result in assets being sold en masse (similar to what happened after Lehman failed) and things can get very ugly very fast.

For much more on the danger that derivatives pose to our financial system, please see this article: “The Coming Derivatives Panic That Will Destroy Global Financial Markets“.

Once again, nobody knows exactly when the sovereign debt bubble will burst, but if we continue down the path that we are currently on, it will inevitably happen at some point.

And according to Professor Carmen Reinhart, when this bubble does burst things could unravel very rapidly…

“These processes are not linear,” warns Prof. Reinhart. “You can increase debt for a while and nothing happens. Then you hit the wall, and—bang!—what seem to be minor shocks that the markets would shrug off in other circumstances suddenly become big.”

At some point the global financial system will hit the wall that Professor Reinhart has warned about.

Are you ready?

When Will The Bubble Burst?

By The Numbers: 20 Facts About The Collapse Of Europe That Everyone Should Know

By The Numbers - 20 Facts About The Collapse Of Europe That Everyone Should KnowThe economic implosion of Europe is accelerating.  Even while the mainstream media continues to proclaim that the financial crisis in Europe has been “averted”, the economic statistics that are coming out of Europe just continue to get worse.  Manufacturing activity in Europe has been contracting month after month, the unemployment rate in the eurozone has hit yet another brand new record high, and the official unemployment rates in both Greece and Spain are now much higher than the peak unemployment rate in the United States during the Great Depression of the 1930s.  The economic situation in Europe is far worse than it was a year ago, and it is going to continue to get worse as austerity continues to take a huge toll on the economies of the eurozone.  It would be hard to understate how bad things have gotten – particularly in southern Europe.  The truth is that most of southern Europe is experiencing a full-blown economic depression right now.  Sadly, most Americans are paying very little attention to what is going on across the Atlantic.  But they should be watching, because this is what happens when nations accumulate too much debt.  The United States has the biggest debt burden of all, and eventually what is happening over in Spain, France, Italy, Portugal and Greece is going to happen over here as well.

The following are 20 facts about the collapse of Europe that everyone should know…

#1 10 Months: Manufacturing activity in both France and Germany has contracted for 10 months in a row.

#2 11.8 Percent: The unemployment rate in the eurozone has now risen to 11.8 percent – a brand new all-time high.

#3 17 Months: In November, Italy experienced the sharpest decline in retail sales that it had experienced in 17 months.

#4 20 Months: Manufacturing activity in Spain has contracted for 20 months in a row.

#5 20 Percent: It is estimated that bad loans now make up approximately 20 percent of all domestic loans in the Greek banking system at this point.

#6 22 Percent: A whopping 22 percent of the entire population of Ireland lives in jobless households.

#7 26 Percent: The unemployment rate in Greece is now 26 percent.  A year ago it was only 18.9 percent.

#8 26.6 Percent: The unemployment rate in Spain has risen to an astounding 26.6 percent.

#9 27.0 Percent: The unemployment rate for workers under the age of 25 in Cyprus.  Back in 2008, this number was well below 10 percent.

#10 28 Percent: Sales of French-made vehicles in November were down 28 percent compared to a year earlier.

#11 36 Percent: Today, the poverty rate in Greece is 36 percent.  Back in 2009 it was only about 20 percent.

#12 37.1 Percent: The unemployment rate for workers under the age of 25 in Italy – a brand new all-time high.

#13 44 Percent: An astounding 44 percent of the entire population of Bulgaria is facing “severe material deprivation”.

#14 56.5 Percent: The unemployment rate for workers under the age of 25 in Spain – a brand new all-time high.

#15 57.6 Percent: The unemployment rate for workers under the age of 25 in Greece – a brand new all-time high.

#16 60 Percent: Citigroup is projecting that there is a 60 percent probability that Greece will leave the eurozone within the next 12 to 18 months.

#17 70 Percent: It has been reported that some homes in Spain are being sold at a 70% discount from where they were at during the peak of the housing bubble back in 2006.  At this point there are approximately 2 million unsold homes in Spain.

#18 200 Percent: The debt to GDP ratio in Greece is rapidly approaching 200 percent.

#19 1997: According to the Committee of French Automobile Producers, 2012 was the worst year for the French automobile industry since 1997.

#20 2 Million: Back in 2005, the French auto industry produced about 3.5 million vehicles.  In 2012, that number dropped to about 2 million vehicles.

One thing that these shocking numbers cannot convey is the tremendous amount of pain that many average Europeans are living through on a daily basis at this point.  To get a peek into what life is like in Greece these days, check out this short excerpt from a recent Bloomberg article

Anastasia Karagaitanaki, 57, is a former model and cafe owner in Thessaloniki, Greece. After losing her business to the financial crisis, she now sleeps on a daybed next to the refrigerator in her mother’s kitchen and depends on charity for food and insulin for her diabetes.

“I feel like my life has slipped through my hands,” said Karagaitanaki, whose brother also shares the one-bedroom apartment. “I feel like I’m dead.”

For thousands of Greeks like Karagaitanaki, the fabric of middle-class life is unraveling. Teachers, salaries slashed by a third, are stealing electricity. Families in once-stable neighborhoods are afraid to leave their homes because of rising street crime.

All over Europe, people that have lost all hope are actually setting themselves on fire in a desperate attempt to draw attention.  Millions of formerly middle class Europeans have lost everything and are becoming increasingly desperate.  Suicide and crime are skyrocketing all over southern Europe and massive street riots are erupting on a regular basis.

Unfortunately, this is just the beginning.  Things are going to get even worse for Europe.

Meanwhile, those of us living in the United States smugly look down our noses at Europe because we are still living in a false bubble of debt-fueled prosperity.

But eventually we will feel the sting of austerity as well.  The recent fiscal cliff deal was an indication of that.  Taxes are going up and government spending is at least going to slow down.  It won’t be too long before the effects of that are felt in the economy.

And of course the reality of the situation is that the U.S. economy really did not perform very well at all during 2012 when you take a look at the numbers.  The cold, hard truth is that the U.S. economy has been declining for a very long time, and there are a whole bunch of reasons to expect that our decline will accelerate even further in 2013.

So if you are an American, don’t laugh at what is happening over in Europe at the moment.  We are headed down the exact same path that they have gone, and we are going to experience the same kind of suffering that they are going through right now.

Use these last few “bubble months” to prepare for what is ahead.  At some point this “hope bubble” will disappear and then the time for preparation will be over.

EU Poster Tower Of Babel

21 Signs That The Global Economic Crisis Is About To Go To A Whole New Level

The global debt crisis has reached a dangerous new phase.  Unfortunately, most Americans are not taking notice of it yet because most of the action is taking place overseas, and because U.S. financial markets are riding high.  But just because the global economic crisis is unfolding at the pace of a “slow-motion train wreck” right now does not mean that it isn’t incredibly dangerous.  As I have written about previously, the economic collapse is not going to be a single event.  Yes, there will be days when the Dow drops by more than 500 points.  Yes, there will be days when the reporters on CNBC appear to be hyperventilating.  But mostly there will be days of quiet despair as the global economic system slides even further toward oblivion.  And right now things are clearly getting worse.  Things in Greece are much worse than they were six months ago.  Things in Spain are much worse than they were six months ago.  The same thing could be said for Italy, France, Japan, Argentina and a whole bunch of other nations.  The entire global economy is slowing down, and we are entering a time period that is going to be incredibly painful for everyone.  At the moment, the U.S. is still experiencing a “sugar high” from unprecedented fiscal and monetary stimulus, but when that “sugar high” wears off the hangover will be excruciating.  Reckless borrowing, spending and money printing has bought us a brief period of “economic stability”, but our foolish financial decisions will also make our eventual collapse far worse than it might have been.  So don’t think for a second that the U.S. will somehow escape the coming global economic crisis.  The truth is that before this is all over we will be seen as one of the primary causes of the crisis.

The following are 21 signs that the global economic crisis is about to go to a whole new level….

#1 Bank of Israel Governor Stanley Fischer says that the global economy is “awfully close” to recession.

#2 It was announced last week that the unemployment rate in Greece has reached an all-time high of 25.1 percent.  Unemployment among those 24 years old or younger is now more than 54 percent.  Back in April 2010, the unemployment rate in Greece was only sitting at 11.8 percent.

#3 The IMF is warning that Greek debt may have to be “restructured” yet again.

#4 Swedish Finance Minister Anders Borg says that it is “probable” that Greece will leave the euro, and that it might happen within the next six months.

#5 An angry crowd of approximately 40,000 angry Greeks recently descended on Athens to protest a visit by German Chancellor Angela Merkel…

From high-school students to pensioners, tens of thousands of Greek demonstrators swarmed into Athens yesterday to show the visiting German Chancellor, Angela Merkel, their indignation at their country’s continued austerity measures.

Flouting the government’s ban on protests, an estimated 40,000 people – many carrying posters depicting Ms Merkel as a Nazi – descended on Syntagma Square near the parliament building. Masked youths pelted riot police with rocks as the officers responded with tear gas.

The authorities had deployed 7,000 police, water cannon and a helicopter. Snipers were placed on rooftops to ensure the German leader’s safety.

#6 The debt crisis is Argentina is becoming increasingly troublesome.

#7 The government debt to GDP ratio in Italy is expected to hit 126 percent this year.  In Greece, it is expected to hit 198 percent.  In Japan, it is expected to hit a whopping 237 percent.

#8 Standard & Poor’s has slashed the credit rating on Spanish government debt to BBB-, which is just one level above junk status.

#9 Back in the year 2000, the ratio of total debt to GDP in Spain was 192 percent.  By 2011, it had reached 363 percent.

#10 Record amounts of money are being pulled out of Spanish banks, and many large Spanish banks are rapidly heading toward insolvency.

#11 Manufacturing activity in Spain has contracted for 17 months in a row.

#12 It is being projected that home prices in Spain will fall by another 15 percent by the end of 2013.

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

#14 There are signs that Switzerland may be preparing for “major civil unrest” throughout Europe.

#15 The former top economist at the European Central Bank says that the ECB has fallen into a state of “panic” as it desperately tries to solve the European debt crisis.

#16 According to a recent IMF report, European banks may need to sell off 4.5 trillion dollars in assets over the next 14 months in order to meet strict new capital requirements.

#17 In August, U.S. exports dropped to the lowest level that we have seen since last February.

#18 Economics Professor Barry Eichengreen is very concerned about what is coming next for stocks in the United States…

“I’m worried that stock markets in the United States in particular have gotten ahead of economic growth”

#19 During the week ending October 3rd, investors pulled more than 10 billion dollars out of U.S. mutual funds.  Overall, a total of more than 100 billion dollars has been pulled out of U.S. mutual funds so far this year.

#20 As I wrote about the other day, the IMF is warning that there is an “alarmingly high” risk of a deeper global economic slowdown.

#21 When shipping companies start laying off workers, that is one of the best signs that economic activity is slowing down.  That is why it was so troubling when it was announced that FedEx is planning to get rid of “several thousand” workers over the coming months.  According to AFP, “its business is being hit by the global economic slowdown”.

For even more signs that the global economy is rapidly crumbling, please see my previous article entitled “The Largest Economy In The World Is Imploding Right In Front Of Our Eyes“.

So is anyone doing well right now?

Yes, it turns out that QE3 is padding the profits of the big banks in the United States and making the wealthy even wealthier just like I warned that it would.

According to the Washington Post, QE3 is helping the big banks much more than it is helping consumers.  Is this what the Fed intended all along?…

JPMorgan Chase and Wells Fargo, the nation’s largest mortgage lenders, said Friday they won’t make home loans much cheaper for consumers, even as they reported booming profits from that business.

Those bottom lines have been padded by federal initiatives to stimulate the economy. The Federal Reserve is spending $40 billion a month to reduce mortgage rates to encourage Americans to buy homes. Instead, its policies may be generating more benefits for banks than borrowers.

So exactly how much has QE3 helped out the big banks?  Just check out these numbers…

Revenue from mortgages was up 57 percent in the third quarter compared with the same period last year at JPMorgan and more than 50 percent up at Wells Fargo.

But should we expect anything else from the Federal Reserve?

The American people are trusting the Fed to protect our economy, and yet they cannot even protect their own shipments of money.  In fact, the Fed recently lost a large shipment of new $100 bills.

Or perhaps could letting people steal money from their own trucks be another way that the Fed is trying to “stimulate the economy”?

Stranger things have happened.

In any event, the truth is that the U.S. economy and the U.S. financial system are unsustainable from any angle that you want to look at things.

We are drowning in government debt, we are drowning in consumer debt, Wall Street has been transformed into a high risk casino where our largest financial institutions are putting it all on the line on a daily basis, we are consuming far more than we are producing, there are more than 100 million Americans on welfare and we are stealing more than 100 million dollars an hour from future generations to pay for it all.

Anyone that believes that we are in “good shape” does not know the first thing about economics.

Sadly, the U.S. is not alone.  Nations all over the globe are experiencing similar problems.

The global economic crisis is just beginning and it is going to get much, much worse.

I hope that you ready.

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

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

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

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

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

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

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

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

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

The adjustment can be immensely painful.

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

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

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

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

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

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

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

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

But it did.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Economic Collapse