The year is 632 A.D., and Muslim hordes have set their sights on the Mideast and North Africa — the old Christian world. And the Caliphate, as the Islamic realm is called, will not be denied. Syria and Iraq fall in 636. Palestine is next in 638. And Byzantine Egypt and North Africa, not even Arab lands, are conquered by 642 and 709, respectively. Then, just two years later, the Muslims cross the Strait of Gibraltar and enter Iberia (now Spain and Portugal). The invasion of Europe has begun.
And the new continent seems no impediment to Islam. After vanquishing much of Visigothic Iberia by 718, the Muslims cross the Pyrenees Mountains into Gaul (now France) and move northward. Now it is 732, and they are approaching Tours, a mere 126 miles from Paris. The Western world — what’s left of Christendom — could very well be on its way to extinction.
Europe is currently easy prey, comprising disunited, often belligerent kingdoms and duchies recently decimated by plague. In contrast, the Islamic world is a burgeoning civilization; so much so, in fact, that it views the Europeans as barbarians. The Muslims also command enormous battle-hardened military forces and have enjoyed almost unparalleled breadth and rapidity of conquest, while Europe no longer has standing armies. It largely relies on peasants to do its fighting, men available only when crops aren’t beckoning. Yet the Christian Europeans do have one great asset: Charles of Herstal, grandfather of Charlemagne.
Sensing the coming storm as early as 721, Charles realized he was going to need a professional, well-oiled fighting force if he was to tackle the Moorish wave washing across Christendom. So, using Catholic Church resources, he set out to train just such an army. And now, 11 years later, it will be put to the ultimate test.
With a horde of 80,000 men, the Muslims once again start moving north in 732 under the leadership of Emir Abdul Rahman Al Ghafiqi. And after defeating Odo the Great and sacking his Duchy of Aquitaine, there is nothing standing between Al Ghafiqi and Paris — except Charles of Herstal and his Frankish and Burgundian army. The two leaders would lock horns in October, on a battlefield between the towns of Tours and Poitier.
When the fateful day arrives, Al Ghafiqi is shocked by what lies before him. The “barbarians” have mustered a force the size of which he isn’t used to seeing in these European backwaters. He nonetheless enjoys a great advantage, outnumbering the Christians by perhaps as much as two to one and possessing heavy cavalry, while his adversaries are limited to infantry. The outcome should still be favorable. And it is.
Charles routs the Muslim forces, stopping their advance into Europe cold. He will eventually chase them back across the Pyrenees Mountains, saving Gaul — and perhaps all of Western civilization— from the sword of Islam. His miraculous 732 victory becomes known as the Battle of Tours (or Poitiers), and it wins him the moniker “Martellus.” Thus do we now know him as Charles Martel, which translates into Charles the Hammer.
Yet the Abode of Islam would not stop hammering Christendom. It is now 1095, and the Muslims are threatening Europe from the east. After seizing most of the Byzantine Empire’s territory 400 years prior, they have now, just recently, subdued Anatolia (most of modern Turkey), thus robbing the Byzantines of the majority of their remaining land. The Muslims are now poised to move west into Greece itself or perhaps north into the Balkans — Europe’s “back door.” And Byzantine emperor Alexius I in Constantinople knows that his realm is too weak to resist. What is he to do?
Alexius decides to approach the Church. Although he and current pope Urban II have been rivals, the pontiff recognizes Islamic expansion to be a clear and present danger. So he decides to address the matter at the Council of Clermont in 1095. In a rousing sermon in front of more than 650 clerics and Christian nobles, he appeals to Europeans to stop bickering amongst themselves and rally to the aid of their eastern brothers. What follows is an excerpt of his words as recorded by the Fulcher of Chartres:
Your brethren who live in the east are in urgent need of your help, and you must hasten to give them the aid which has often been promised them. For, as the most of you have heard, the Turks and Arabs have attacked them and have conquered the territory of Romania [the Greek empire] as far west as the shore of the Mediterranean and the Hellespont, which is called the Arm of St. George. They have occupied more and more of the lands of those Christians, and have overcome them in seven battles. They have killed and captured many, and have destroyed the churches and devastated the empire. If you permit them to continue thus for awhile with impunity, the faithful of God will be much more widely attacked by them. On this account I, or rather the Lord, beseech you as Christ’s heralds to publish this everywhere and to persuade all people of whatever rank, foot-soldiers and knights, poor and rich, to carry aid promptly to those Christians….
And thus was born the 11th-century Hammer writ large: the Crusades.
Like Martel’s campaigns before them, the Crusades were defensive actions designed to stave off Muslim aggression. Oh, this isn’t what you learned in college, I know. It’s not what we hear from the media. It isn’t what’s portrayed by Hollywood. But it is the truth. And it was explained well by Thomas Madden, Chair of the History Department at Saint LouisUniversity. In “The Real History of the Crusades” he wrote:
The Crusades are generally portrayed as a series of holy wars against Islam led by power-mad popes and fought by religious fanatics. They are supposed to have been the epitome of self-righteousness and intolerance, a black stain on the history of the Catholic Church in particular and Western civilization in general. A breed of proto-imperialists, the Crusaders introduced Western aggression to the peaceful Middle East and then deformed the enlightened Muslim culture, leaving it in ruins.
… [But] Christians in the eleventh century were not paranoid fanatics. Muslims really were gunning for them. While Muslims can be peaceful, Islam was born in war and grew the same way. From the time of Mohammed, the means of Muslim expansion was always the sword. Muslim thought divides the world into two spheres, the Abode of Islam and the Abode of War…. In the eleventh century, the Seljuk Turks conquered Asia Minor (modern Turkey), which had been Christian since the time of St. Paul. The old Roman Empire, known to modern historians as the Byzantine Empire, was reduced to little more than Greece.
… [The Crusades] were not the brainchild of an ambitious pope or rapacious knights but a response to more than four centuries of conquests in which Muslims had already captured two-thirds of the old Christian world. At some point, Christianity as a faith and a culture had to defend itself or be subsumed by Islam. The Crusades were that defense.
And that is why I defend them today. No, they weren’t perfectly executed, nor could they achieve all their objectives any more than the Cold War truly vanquished the left. Evil is always afoot. But note that the Mideast and North Africa had more Christians than did Europe at the time of the early Muslim invasions — but no one to Crusade for them. Thus, it’s easy to imagine that, were it not for our hammering medieval heroes, we could well be what the Mideast is today. And unless we shelve multiculturalism and become what those crusaders were yesterday, we may not have a tomorrow.
Across Syria these days, one is able to examine massive evidence that this ancient civilization, the historic bastion of nationalist Arabism and since the 1948 Nabka, an essential pillar of the growing culture of Resistance to the Zionist occupation of Palestine, is becoming awash with foreign arms being funneled to “rebels” by countries advocating regime change.
This observer has been researching foreign arms transfers into certain Middle East countries since last summer in Libya, where to a lesser degree the identical foreign actors were involved in facilitating the transfer of arms and fighters to topple the then, “Libyan Arab Jamahiriya.”
During a recent stay in Syria, I was able to observe first hand, substantial demonstrative evidence supporting the thesis that American, Zionist and Gulf intelligence agencies as well as private arms dealers from these countries top the list of more than two dozen countries benefiting from the crisis in Syria by injecting arms. These countries gain politically and financially, via governmental and black market arms transfers.
Which countries are sending the most weapons into Syria to arm militia?
A list of the top 24 countries, among the more than three dozen that are currently involved in sending weapons to Syria to achieve regime change include: USA, Iraq, Lebanon, Israel, Turkey, Qatar, Saudi Arabia, Yemen, Bahrain, UK, France, Canada, Belgium, Germany, Austria, Brazil, Portugal, Poland, Yugoslavia, Czech Republic, Bulgaria, Italy, Spain, and Argentina.
Above: one of the periodic lists complied of foreign weapons confiscated from foreign fighters in Syria. Aug.-late September, 2012
Nearly two-thirds of the above listed arms suppliers are members of NATO and constitute almost half of NATO’s 28 country membership.
Russia is not included in the above list because it is the main supplier of arms to the Syrian government. Yet, one finds older USSR era weapons and even some more recent vintage Russian arms in rebel hands, the latter from the decade (12/79-2/89) of Soviet, occupation of Afghanistan. Also offering Russian weapons are a growing number of black market arms dealers of whom there is no shortage along the Turkey-Syrian border and elsewhere. This recent visitor to Syria was offered near the Old City, AK 47’s (Russian Kalashnikovs) or Rocket Propelled Grenades (RPG) for $ 1,800 (in Lebanon today and before the Syrian crisis the price was around $800. After some bargaining and starting to walk away a couple of times, the “special one-time only price for an American friend” dropped to $ 750 each. Russian made Dragunov sniper rifles are being offered at $ 6,500 but can be bought for around $ 5000.Buying arms these days in Syria is a caveat emptor proposition. Fake weapons and military rejects/defects are also being offered by hustlers from nearby countries including Lebanon, Iraq and Turkey.
The involvement of numerous countries in the Syrian crisis as arms suppliers and political operatives was tangentially referenced by the recent UN Security Council Statement of 12/25/12 which admits the existence of foreign actors and implies their arms supplying activities by urging “all regional and international actors to use their influence on the parties concerned to facilitate the implementation of the (Eid al Adha) ceasefire and cessation of violence.”
Syria’s Permanent Representative to the United Nations, Bashar al-Jaafari observed last week: “This part of the [Security Council] press statement, mentioned for the first time, proves Syria’s view repeated since the beginning of the crisis on the existence of Arab, regional and international parties influencing the armed groups negatively or positively. Therefore, those parties need to be addressed.”
One of the key challenges for the UN and Arab League envoy, Lakhdar Brahimi whose aides told this observer at the Dama Rose hotel on 10/22/12 where we were staying, is: “We need to persuade key countries in the Middle East, but also internationally, not to support the rebels with arms.
The failed initiative of envoy El Brahimi, was the third ceasefire attempt to date following the December 2011Arab League proposal and the April 2012 Kofi Annan initiative, both of which were endorsed by the Syrian government and most of the world community. Some rebel militia, but not nearly enough, did endorse the Brahimi four day Eid al Adha ceasefire only to have it collapse this past weekend. To his credit, Brahimi continues his work.
The same Brahimi sources suggested that the United States may also be supplying man-portable air-defense systems (Manpods) to rebels in Syria. According to Russian Foregin Ministry spokesman Alexander Lukashevich, speaking on 12/15/12: “At the same time, it is also well-known that Washington is aware of supplies of various types of arms to illegal armed groups operating in Syria. Moreover, the United States, judging by admissions by American officials that have also been published in American media, is conducting coordination and providing logistical support for such supplies.” NBC News, based in New York reported in July that Syrian insurgents had obtained two dozen US MANPADS, delivered from Turkey.
A month after the October 2011 death of Libyan leader Muammar Qaddafi, Secretary of State Hillary Clinton announced in Tripoli that the U.S. was committing $40 million to help Libya “secure and recover its weapons stockpiles.” Congressional sources report that the Obama administration is fully aware that quantities of these arms are current in Syria and more in transit.
With respect to arms moving from Libya to Syria, on the night of Sept. 11 Libya time, in what was his last public meeting, US Ambassador Christopher Stevens met with the Turkish Consul General Ali Sait Akin, and accompanied him to the consulate front gate just before the assault began. Although what was discussed has not yet been made public, Washington sources including the pro-Zionist Fox News speculate that Stevens may have been in Benghazi negotiating a weapons transfer, from Libya to Syria.
Earlier this year, Assistant Secretary of State for Political and Military Affairs Andrew Shapiro expressed concerns that the increasing flow of Libya arms was far from under control. Speaking to the Stimson Center in Washington D.C. on 2/10/12 Shapiro said: “This raises the question — how many weapons and missiles are still missing? The frank answer is we don’t know and probably never will.”
According to a 10/14/12 report by the Times of London, a vessel flying the Libyan flag named Al Entisar (Victory), loaded with more than 400 tons of cargo, docked in southern Turkey 35 miles from the Syrian northern border. While some of the undeclared cargo was likely humanitarian, staff accompanying UN envoy Brahimi during his recent Syrian trip report the Al Entisar also carried the largest consignment of foreign weapons to date, including surface-to-air anti-aircraft missiles, RPG’s and MANPADS destined for Syria.
Partly because of the jihadists and arms entering Syria from its northern border, southern Turkey is increasingly referred to here in Damascus as “New Afghanistan”, given its matrix of jihadists, salafists, wahabists, and battle-hardened panoply of arriving foreign would-be mujahedeen and al Qaeda affiliates.
One teenage al Qaeda wannebe explained to the author that his specialty was making and using homemade specialized knives as shown in this photo. He also delivered a mini-lecture he said was based on a Koranic Hadith explaining why severing heads of animals and adversaries is actually the most humane method. He gave earnest assurances that if allowed to perform a one-time demonstration, this observer would feel no pain and he would post the photo on Facebook!
Remarkably, as was witnessed in 2007, during the conflict at the Nahr al Bared Palestinian refugee camp in north Lebanon, some of the arriving eager jihadists in “New Afghanistan” actually believe that they are fighting against Zionist forces near occupied Palestine and not killing fellow Arabs in Syria.
Some, but not all of the many types of small arms flowing into Syria in large numbers, and viewed by this observer include:
7.62mm Tabuk (Yugoslavia) rifles, Mass rifles (UK), 7.62 mm rifles (Poland), 12 mm rifles (Italy), 7.62 mm Kalashnikovs (several countries versions), 9 mm ‘fast gun’, (Austria), 7.62 mm Val (Belgium), G3 7.62 mm G3 rifles (Germany), 7.5mm model 36 rifles (France), M16 and a variety of sniper and other rifles (USA), 7.62 rifles (Bulgaria, 10.5 Uzi and other automatic machine guns, three types of hand grenades (Israel), 9 mm guns (Canada), 7 mm guns (Czech Republic), 7 mm guns (Brazil).
Photo: 10.23.12 Syria
Israeli weapons are among the most frequently found in Syria as was the case in Libya. Israeli arms dealers are claimed to have recently intensified links with Blackwater International and also are currently smuggling through the Golan Heights, the tri-border area of south Lebanon, occupied Palestine and Syria.
The observer also examined and was briefed on M72 LAW and AT-3 anti-tank missiles developed by the United States. But the extent of their use is difficult to verify. Most of the arms shown in accompanying photos are from the main urban centers and near the Turkish, Iraqi, Lebanese and Jordanian borders.
In tightly built up urban areas such as Homs, Idlib and Aleppo, door to door fighting includes a battle among snipers. According to one Syrian military intelligence source in whose Damascus office this observer discussed the subject, the most frequently confiscated sniper rifles currently being found in the hands of “rebels” include:
· the U.S. Army & USMC M1903-A4 (also: USMC M1903-A1/Unertl), the U.S. Army & USMC M1C & M1D and U.S. Army M21;
Photo: Damascus 10/23/12: American weapons from Iraq, Afghanistan, Turkey and NATO stores are entering Syria with the aid of Qatar and Saudi Arabia and black market arms dealers.
· the Israeli M89SR Technical Equipment International 7.62x51mm NATO Semi-automatic, Galil Sniper Rifle and the T.C.I. M89-SR,
· the British .243 Winchester, 7.62x51mm NATO/.308 Winchester,.300 Winchester Magnum, and the 338 Lapua Magnum Bolt action sniper rifles.
Photo: Syria 10/13/12: The most frequently confiscated sniper rifles currently being found in the hands of “rebels” in Syria include the above shown U.S. Army & USMC M1903-A4. Other US sniper rifles include the USMC M1903-A1/Unertl), the U.S. Army & USMC M1C & M1D and U.S. Army M21
A few Afghanistan era Russian Dragonov SVD and SV-98 sniper rifles have also been confiscated among an assortment of others.
Foreign jihadists have some access to Soviet-era DShK heavy machine guns or ZU-23-2 anti-aircraft cannons which are used for anti-aircraft and fire support. Both use fairly scarce high-explosive rounds and armor-piercing rounds, which are capable of penetrating the armor of the Syrian military’s BMP infantry fighting vehicles. The ZU-23-2 “Sergey”, also known as ZU-23, is a Soviet towed 23 mm anti-aircraft cannon. Vehicle mounted Zu-23-2’s are relatively easy to spot by government aircraft and artillery units are used to attack a target and quickly flee to avoid counter strikes.
On 10/25/12 Russia reiterated its claims that the US assists and coordinates arms deliveries to foreign-sponsored insurgents battling the Syrian government forces. Russia’s chief military officer said that Syrian armed groups have acquired US-made weapons, including Stinger anti-aircraft missiles. This observer saw many weapons from more than a dozen types of IED’s (improvised explosive device) to medium sized artillery pieces but no missiles.
Photo: 10/24/12 Damascus, Syria
Improvised Explosive Devices are a key rebel weapon with many arriving from Iraq and camps near Hataya, Turkey. Many DIY (do it yourself) improvisations have been uncovered across Syria in both urban and rural areas. This observer examined and was briefed on several types, including those shown above.
According to the Russian Foreign Ministry issued statement of 10/25/12, “Washington is aware of the deliveries of various weapons to illegal armed groups active in Syria. Moreover, judging by the declarations of US officials published in US media, the US coordinates and provides logistical assistance in such deliveries.”
Some analysts in Damascus claim that Syria’s potential military strength has not been as effective as it could be in the current urban fights against rebels. The government appears very strong militarily if one studies the statistics regarding Syria’s large and disciplined army which continues its support and also given its sophisticated long range missiles, air defense systems that have deterred an airborne attack from Israel. One reason progress has at times appeared slow against the “rebels” according to some local analysts was a certain initial unpreparedness to confront highly motivated guerrilla militia in downtown densely populated areas. These kinds of battles, it is claimed, require a mobile infantry, armored flexibility and very effective use of light arms. The Assad government’s “adapt, catch up and go on the offensive” paradigm is developing rapidly according to US Senate Armed Service Committee sources who assert that the Syria army has actually become battle hardened, tougher, stronger and more disciplined over the past several months. But it has taken time and has incurred a significant cost.
Weapons examined by this observer in Syria during 10/12 include some of the more than 1,750 new American sniper rifles channeled from Iraq and NATO supply stores to rebel militia.
How foreign weapons are entering Syria
As widely speculated particularly in the regional media, foreign supplied weapons to “rebels” arrive by air, sea and mainly by land from Iraq, Turkey, Lebanon, Saudi Arabia, Qatar, Jordan and occupied Palestine.
Israel is reported, by some researchers in Damascus who have been covering the crisis for nearly 20 months, to be sending arms to Syria from Kurdistan, having had much experience in Africa, South America and Eastern Europe via Mossad and Israeli black market arms dealing. What Israel did in Libya in terms of a wide spread arms business it is also trying to do in Syria. Israeli arms, according to Syrian and Lebanese sources are being transported into Syria from along the tri-border area of South Lebanon, near Shebaa Farms, close to Jabla al-Saddaneh, and Gadja. In addition, Israeli smugglers have increasingly, over the past five months, been seen by locals moving arms inside Syria via the Golan Heights. These violations of Syrian and Lebanese sovereignty raise serious questions about the vigilance of the United Nations Disengagement Observer Force Zone (UNDO) based in the Golan Heights as well as the UN Interim Force in Lebanon (UNIFIL) and the Lebanese Army as well as National Lebanese Resistance units near the ‘blue line’ to stop the illicit Israeli arms transfers.
The recent arrival in southern Turkey and along the northern Syrian border of Blackwater mercenaries is expected to increase the foreign arms flow. Currently using the name Academi (previously known as Xena- Xe Services LLC, Blackwater USA and Blackwater Worldwide) Academi is currently, according to Jane’s Defense Weekly, the largest of the US governments “private security” contractors. Details of its relationship with the US Defense Department and the CIA are classified.
Is there a coherent US policy toward the Syrian crisis?
Secretary of State Clinton has been announcing recently that the U.S. is increasing its “non-lethal support” (i.e. direct shipments as opposed to boots on the ground or ballistic weapons) according to her Congressional liaison office. She also confirmed that Washington is working with its friends and allies to promote more cohesion among the disparate Syrian opposition groups with the aim of producing a new leadership council following meetings scheduled for Doha in the coming weeks.
Photo: Syria: 10/24/12
Examples of US, UK and NATO “non-lethal aid” equipment taken from militia in south and north Syria between 5/2011 and 10/2012.
However, to the consternation of the State Department, General David Petraeus the former US commander of NATO forces in Iraq, now director of the CIA acknowledged, during his senate confirmation hearings. “Non-lethal aid to combatants, including communication equipment, is sometimes more lethal and important than explosive devices due to the logistical advantages they provides on the battlefield.”
In tandem with the US, the UK and several European governments are supplying “non-lethal” aid to the Syrian opposition, including satellite communications equipment according to Syria security sources.
There is also plenty of anecdotal and demonstrative and probative evidence in Syria of human weapons patterned on the “Zarqawi model” which refers to the bloody al Qaeda in Mesopotamia campaign named for its leader Abu Musab al Zarqawi after U.S. troops occupied Iraq.
In a speech this week in Zagreb, Croatia, this week, Secretary of State Clinton insisted that any group seeking to oust President Bashar al-Assad must reject attempts by extremists to “hijack” a legitimate revolution. She added, “There are disturbing reports of heavily armed foreign extremists going into Syria and attempting to take over.” Clinton used her strongest words to date concerning risks that the uprising in Syria could be overtaken by militants who do not seek a democratic replacement or the reforms that the current government claims it is trying to implement. She told her conferees: “We made it clear that the SNC can no longer be viewed as the visible leader of the opposition. They can be part of a larger opposition, but that opposition must include people from inside Syria and others who have a legitimate voice. We also need an opposition that will be on record strongly resisting the efforts by extremists to hijack the Syrian revolution. There are disturbing reports of heavily armed extremists going into Syria and attempting to take over.” Clinton advised her colleagues that the US has become convinced that the SNC does not represent the interests of all ethnic and religious groups in Syria and that it has little legitimacy among on-the-ground activists and fighters, and has done little to stem the infiltration of Islamist extremists into the opposition forces.
Clinton’s language is being interpreted by some as evidence that a post-election Obama Whitehouse, she he win on November, may move toward the Russian, Chinese, and Iranian position and away from, what one Congressional source derisively labeled, “ the view from the Gulf gas stations” i.e. Saudi Arabia, Qatar and some other despotic monarchies.
The intervention in Syria by more than three dozen countries supplying weapons must be stopped. Both sides of the Syrian crisis need to manifest by actions, not just words, a serious commitment to meaningful dialogue. The above noted arms supplying countries, and others off stage, have a solemn obligation to their citizens and to the world community to immediately halt the shipment of arms.
They should, and their people should demand that they do without further delay, honor the words of Isaiah 2:3-5….”and they shall beat their swords into plowshares, and their spears into pruning hooks: nation shall not lift up sword against nation, neither shall they learn war anymore.”
Granted, perhaps a cliché and certainly far easier said than done.
Yet, as Oregon’s late great US Senator Wayne Morse used tell audiences around America during the Vietnam War, quoting General George Marshall, “The only way we human beings can win a war is to prevent it.”
It’s time for the international community to end the Syrian crisis diplomatically, stop funneling arms and cash fueling hoped for regime change elements. Instead, they must demand that all the involved parties immediately engage in serious dialogue and settle their differences.
Why, then, are government policies internationally still pursuing extremist measures? In the U.S., a third round of excess money printing —called Quantitative Easing — began recently in which banks are directly profiting by unloading their toxic mortgages on the Federal Reserve’s balance sheet (another backdoor bailout paid by taxpayers).
After the U.S. presidential election, both Democrats and Republicans are committed to different versions of historic cuts to social services, education, Medicare, unemployment benefits, and very likely Social Security. This bi-partisan plan is often referred to as a “grand bargain,” the details of which both parties are still haggling over.
In Europe things are no better. After the Euro Zone central bank promised investors its full backing to bailout all Euro Zone members — by printing money — the world economy sighed a heavy relief. But still the Euro Zone — along with the U.S. — is pursuing a two-pronged solution for an extreme economic crisis: austerity measures and the less-discussed “structural reforms.”
What are these policies? Austerity is simple enough: government cuts to social spending, health care, education, pensions, etc. — to balance heavily indebted public budgets (at the expense of working people, rather than taxing the rich and corporations). Austerity can also be achieved through privatization, where once publicly run programs/facilities are sold cheaply to private firms to make a profit, thus taking the cost off the government’s budget.
Structural reforms on the other hand are meant to boost economic (corporate) growth, by government intervention in commodity markets — most commonly the labor market. It’s called structural reform because markets are usually relatively stable. For example, the labor market is deep-rooted in powerful social forces — wages, benefits, and working conditions are heavily influenced by unions, who use their organization and strike threat to pressure corporations and governments to pay living wages. Non-union workers benefit directly by the unions’ ability to alter the national labor market, since non-union companies have to compete with union companies for workers, who naturally go where wages are higher. Professional, higher-paid workers benefit too, since society expects them to get higher wages than, say a carpenter.
In Europe, structural reforms targeting the labor market — alongside austerity measures — are rousing the unions and broader community into the streets with massive demonstrations: Spain, Portugal, Greece, and other countries are fighting reforms that politicians are euphemistically calling “labor market flexibility.” This simply means that unions will be undermined by their inability to protect workers’ jobs, making firing easier (“flexibility”), which results in compelling workers into accepting lower wages and benefits.
The pro-corporate Economist magazine reports about Portugal:
“With his decision to finance a reduction in company [corporate] costs through a sharp cut in workers’ take-home pay, Pedro Passos Coelho, Portugal’s prime minister, appears to have taken reform past the limit of what is deemed acceptable by large sections of the electorate.”
“… [President] Hollande has given union leaders and bosses until December to negotiate [anti-union] labor-market changes. On the table are various options, including making it possible for firms [corporations] to reduce hours and salaries in a downturn against a guarantee of job security, along the lines introduced by [Germany's prime minister]… in 2003.”
“… the new [labor] law makes it easier and cheaper to lay off workers. For most firms, maximum lay-off payments [unemployment benefits] will be reduced from 42 months’ pay to 12 months… it will hugely boost business confidence.”
Reducing unemployment benefits is a very popular labor market structural reform for the 1%, since it makes workers more desperate for work, and thus more accepting of low-wage jobs — consequently lowering workers’ power in the labor market overall, as wages are lowered nationally.
And while Europe’s austerity and structural reforms are on the front page of international media — due to the giant protests and general strikes against them — the exact same policies have been pursued by the U.S. with barely a murmur. Were it not for the labor upsurges in Wisconsin and more recently Chicago, these policies would be completely off the public’s radar.
The Wisconsin uprising was in response to a labor-market structural reform pursued by Republicans, denying unions bargaining rights — effectively destroying the union. Democrats, however, are pursuing anti-labor structural reforms — weakening unions — as national policy also, though less directly, by demanding that unions across the country take massive concessions in wages and benefits — a slower, yet more effective form of labor market restructuring.
The teachers in Chicago went on strike against another form of anti-labor structural reform pursued by both Democrats and Republicans. The media-hype around “firing bad teachers” is really a labor-market reform in disguise; the real intention is to bust unions, who are only able to stay strong by their ability to protect the jobs of their members (of course there already exists ways to fire bad teachers).
Teacher merit pay is yet another labor reform measure aimed to weaken unions, since it effectively lowers wages by preventing raises (there is zero evidence that merit pay raises education standards, or that charter schools outperform public schools). It means that every teacher’s salary is negotiated individually, and it allows management to punish its critics by denying them merit pay raises.
The teachers are especially targeted in the U.S. because they are the strongest union in the country, due to their numbers, organization, and connections to the community. If they are forced to give “structural” concessions, other unions will be heavily pressured to do so, and thus the labor market will be altered to the benefit of the corporations.
The labor reform attacks — combined with austerity budget cuts — are happening in different forms on a city, state, and federal level with the full backing of the Democrats and Republicans (there is no “debate” in the presidential election about education policy). Thus, if not for the Wisconsin and Chicago struggles, there would be little social consciousness around these issues.
The reasons that austerity and structural adjustment have not produced a Europe-like movement yet is because most labor unions have increasingly accepted these concessions without putting up a real fight. Many labor leaders would simply rather accept these policies, since fighting them would put them in conflict with their “friends,” the Democratic politicians pursuing these anti-labor policies.
Hopefully, the post-Occupy movement can show the labor movement the way forward. On November 3rd there will be protest demonstrations against austerity in a number of cities across the country. These protests are targeting the ongoing state by state cuts — and federal post-election cuts — to education, transportation, health care, social programs, and public-sector workers. The protests are challenging the very concept of austerity, as working people refuse to pay for the crisis created by the rich and corporations. There is a potential for these protest demonstrations to teach the American public the word “austerity,” assuming they are large enough and connect with the broader community that directly experiences these policies.
Regardless of the results of November 3, demonstrations about the austerity issue in the U.S. will inevitably continue, since even mainstream economists mostly agree that there will be no return to the pre-recession economy. The policies of austerity and structural reform — along with war — are long-term survival strategies of capitalism, which is evolving to survive a global-wide crisis of corporate growth rates by creating a “new normal” of social expectations: lower wages and fewer social programs.
The first step in fighting these measures is mobilizing working people and the broader community in massive Europe-like demonstrations. This tactic educates the whole nation about the issues, which would otherwise remain in the dark. Once the 99% is in the streets together screaming collective demands with a united voice, the movement will decide how best to act, whether it be the general strikes or new political parties that have emerged in Europe.
The U.S. post-election austerity surprises will give new opportunities for millions of people to get into the streets. They will no longer be able or willing to remain ignorant about the nation’s new normal.
“The Greek economy is truly broken. The circuits of credit are so badly damaged that even efficient, profitable firms have been cut out of the capital markets …. Moreover, the new spending cuts… will give the forces of recession another boost. To cut a long story short, there is no doubt that such loosening up will simply prolong the agonising death of the Greek social economy.” – Yanis Varoufakis, economist, University of Athens
Unemployment is still rising, the deficits continue to widen, and the economy is in tatters. Everything is fundamentally the same as before, with one exception, the victor (New Democracy’s Antonis Samaras) remains firmly committed to staying-the-course and meeting the terms of the bailouts, whereas, the loser (Syriza’s Alexis Tsipras) rejects the austerity measures laid out in the Memorandum Of Understanding (MOU) and promises to renegotiate the agreement with the troika. (The European Commission, the IMF, and the European Central Bank)
Samaras’s slim victory means that Greece will get more financial aid (loan installments), but will be required to implement another round of savage cuts to social spending, this time in the amount of $11.5 billion. These cuts will further inhibit growth, which will reduce tax revenues leading to even bigger budget deficits. When the government is unable to hit its deficit targets, (as everyone expects) then EZ policymakers will suspend the bailouts and the crisis will flare up again.
It’s a vicious circle that can only end one way, with Greece leaving the eurozone and returning to the drachma.
So, what happens next?
New Democracy leaders will try to cobble together a coalition government with other “pro bailout” parties (like PASOK) while trying to win meager concessions to extend the length of existing loans and reduce the rates on others. Some analysts think that the troika will try to be more flexible on the terms of the bailouts to reduce growing social unrest, but that doesn’t seem likely.
German chancellor Angela Merkel nixed the idea of greater forbearance or debt reduction just hours after the election results were announced. Here’s the account from Reuters:
“German Chancellor Angela Merkel said on Monday a new Greek government had to meet commitments made to international lenders. Speaking to reporters at a Group of 20 leaders’ meeting, Merkel said any loosening of agreed reform pledges after Sunday’s narrow election victory for Greece’s pro-bailout parties would be unacceptable.” (Reuters)
Merkel is not going to cut Greece any slack. Either the deficit targets are reached and Greece complies with its obligations, or the loans will be cut off. “Either pay up or get out”: that’s the massage from Berlin. Judging by the reaction in German newspapers, Merkel’s hardline approach is wildly popular across the political spectrum. Just look at these clips from Monday’s editorials. This is from the center-right Frankfurter Allgemeine Zeitung:
“The Greek electorate is obviously divided. But the country needs a government that has the power and courage to pass and implement the unavoidable reforms: a government that can convince the people that their country needs a fundamental renewal. It won’t be easy to form such a government — ‘not easy’ being a gross understatement. The coming days will show just how difficult it will be.”
This is from the Financial Times Deutschland:
“The Greeks must provide clear affirmation of reforms. They don’t just owe this to their fellow Europeans, from whom they are accepting aid, but also to themselves. The population must understand that there can be no going back to the pre-crisis state of affairs.”
Finally, from the conservative Die Welt:
“Chancellor Merkel insists on shared responsibility. She emphasizes that austerity and reforms are the way to solve Europe’s debt crisis. This clarity is even making many Germans uneasy. And yet these conclusions, which are actually banal, are being made within a political context that is increasingly volatile.
Germany is showing strength, without trying to dominate, and yet it is punished by being despised. If Angela Merkel were to change course, if she were to buckle to criticism, then it would really not be good for Europe or for Germany.”
Reforms, reforms, reforms. German pundits love reforms, which is why they admire their reform-minded chancellor, Frau Merkel. But where have these reforms–which are more commonly called “austerity measures”–worked? In which country has debt consolidation, structural adjustment, privatization, and union busting led the way out of recession to a strong recovery? Ireland? Spain? Portugal? Italy?
The evidence suggests that Merkel’s policy doesn’t work which is why many of the world’s leading economists have blasted austerity as counterproductive.
So how is it that these “experts” still think they are right when 2 years of experience demonstrates that they’re wrong? Just look at bond yields. Just look at the banks. Just look at unemployment. Just look at GDP. By every objective standard, the policy has failed. This is no longer a debatable point. The facts speak for themselves.
On Tuesday, while leaders of the world’s major economies met in Los Cabos, Mexico for a G20 summit, a failed auction of Spanish debt set off alarms reminding the gathering that the crisis was still unresolved. Here’s the story from Reuters:
“Spain paid a euro era record price to sell short-term debt on Tuesday, pushing it closer to becoming the biggest euro zone country to be shut out of credit markets. The soaring borrowing costs highlight the shortcomings of a June 9 euro zone deal to lend Spain up to 100 billion euros ($126 billion) for its banks. They also illustrate how Europe’s problems run much deeper than Greece, brought back from the brink of default in Sunday’s parliamentary election….” (Reuters)
Spanish 10-year bond yields remain above 7 percent at present after hitting a high of 7.28 percent yesterday. Economists think that anything above 7 percent is unsustainable.
So, while one fire has been doused in Greece another has broken out in Spain. It’s only a matter of time before the European Central Bank chief Mario Draghi will be summoned to reopen the Securities Market Program (SMP) and resume buying Spanish debt to push down bond yields and avoid a meltdown.
Why is the crisis spreading? And why has it shifted to Spain, after all, up until 2007, the Spanish government’s balance sheet looked better than Germany’s. They had lower public debt, had never broken the EZ’s deficit rules, and had consistently ran budget surpluses.
So why Spain? The problem isn’t Spain. Nor is it Ireland, Greece, Portugal or Italy. It’s the monetary union itself.
The EZ’s creators were warned that a monetary union outside a fiscal and political union would not work, but they proceeded anyway. Now they’re trying to correct their error by inflicting pain on the members, (internal devaluation) because the only other choice they have is to create a United States of Europe, which would require public referenda in all 17 countries. They know that their chances of success in that effort would be quite small, so they’re not even going to even try, which why the band-aid remedies will continue until one member leaves and the race for the exits begins.
Slow-motion Bank Run…
“The burden of recapitalizing insolvent banks or loss-making acquisitions of solvent banks will fall on Spanish citizens.” – Karl Whelan, economist at University College, Dublin.
Sure, it’ll keep the markets bubbly until mid-week when fears of the Greek elections set in, (June 17) but that’s about it. It won’t fix the eurozone’s underlying problems, in fact, it doesn’t even address them. The narrow purpose of the bailout is to keep insolvent banks propped up to avoid another Lehman Brothers-type catastrophe. That’s it. In other words, the 100 billion will not boost competitiveness, spur growth, reduce unemployment, or increase fiscal and political integration. It doesn’t do any of these things, in fact, Spain’s debt-to-GDP ratio will widen even more due to the new burden its leaders have taken on. That means, Spain’s working people will have to endure even harsher conditions for a longer period of time to repay the obligations assumed by Madrid. How does that help?
The Eurogroup has agreed to lend Spain 100 billion, but they have no way of knowing how much more the country will need in the future. Just take a look at this and you’ll see what I mean:
“Spain’s banks have over €300 billion in exposure to the real-estate sector, mostly through loans to developers. Around €180 billion of this exposure is considered “problematic” by Spain’s central bank.
Estimates suggest that there are about 700,000 vacant newly built homes, but including repossessed properties the total could be as high as one million or even higher. At current sales levels, it will take many years to clear the backlog, which will be compounded by more properties being completed and coming onto the market. Housing prices have fallen by 15-20% but are forecast to fall eventually by as much as 50-60%. A severe recession and unemployment of 25% means that losses on Spain’s over €600 billion of home mortgages loans are likely to also rise.” (“The Spanish “Bailout”, Whoops – “Assistance”!, Satyajit Das, Naked Capitalism)
Housing prices have a long way to fall which means the slump is going to drag on indefinitely putting more pressure on bank balance sheets. Expect more bailouts to come. The 100 billion is just the tip of the iceberg.
And, keep in mind, the bailout will not ease credit conditions either. The money will be used to roll over debt, and to restructure and recapitalize underwater banks. The truth is, that none of the bailouts have eased credit conditions. Even after the ECB launched its trillion euro Long-Term Refinancing Operation (LTRO)–which provided 3-year, low interest loans to financial institutions– lending is still in the doldrums with no sign of improvement. So, don’t expect the bailout lead to another expansion.
The same rule applies to borrowing costs. The bailout doesn’t ensure that yields on Spain’s debt will fall or that the ratings agencies won’t continue to downgrade its banks and sovereign bonds. (which will make borrowing more expensive) In fact, adding 100 billion to the country’s debt load will probably trigger more downgrades, lowering Spanish debt to junk status.
Finally, the bailout will not stop the slow-motion bank run that’s seen 100 billion euros exit Spain in the last year. (How’s that for symmetry?) The country is borrowing the exact same amount that it’s lost due to the flawed architecture of the eurozone which does not provide blanket guarantees on deposits.
Here’s an excerpt from the Eurogroup’s statement on Spain:
“The Eurogroup supports the efforts of the Spanish authorities to resolutely address the restructuring of its financial sector and it welcomes their intention to seek financial assistance from euro area Member States to this effect….
The financial assistance would be provided by the EFSF/ESM for recapitalisation of financial institutions. The loan will be scaled to provide an effective backstop covering for all possible capital requirements estimated by the diagnostic exercise which the Spanish authorities have commissioned to the external evaluators and the international auditors. The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to EUR 100 billion in total….
The Eurogroup considers that the Fund for Orderly Bank Restructuring (F.R.O.B.), acting as agent of the Spanish government, could receive the funds and channel them to the financial institutions concerned. The Spanish government will retain the full responsibility of the financial assistance and will sign the MoU.”
So, Prime Minister Mariano “We don’t need help” Rajoy will have accept an IMF monitoring team that will sift through the books of distressed Spanish banks and expose the boundless red ink and corruption that lies therein. The involvement of the IMF means that a lot of shareholders are going to be wiped out while bondholders take severe haircuts.
Spain will now join the other bailout-dependent countries, Greece, Portugal and Ireland, although it will not be asked to increase austerity measures which Rajoy has already implemented with gusto. With the economy already in deep recession and unemployment tipping 25 percent, EZ finance ministers believe that more belt tightening would be counterproductive. Accordingly, the European Commission has agreed that Spain should be given an extra year to bring its budget deficit down below the EU limit of 3 percent of GDP. Here’s how Greek economist Yanis Varoufakis summed up recent developments in Spain:
“Spain’s current predicament is instructive: To get money to give to its decrepit banks, the nation must be humiliated and undergo further fiscal waterboarding so that Italy and others are deterred from turning to the EFSF (European Financial Stability Facility) for help. In this sense, when Europe’s functionaries say that there is no need for further action on Spain since the EFSF is available to help, they are inviting the Spanish to enter the Workhouse for a life of undeserved misery on behalf of their bankers. And they have the audacity to call this ‘solidarity’ with the Spanish people.” (“Solidarity Euro-Style: Finnish loans, ECB bond purchases, EFSF tough love and assorted horror stories from the postmodern Euro-Workhouse”, Yanis Varoufakis)
The Spanish bank bailout is only going to make matters worse for working people who’ll see the losses of corrupt financial institutions heaped onto their shoulders via higher taxes, cuts to social programs, and a firesale of publicly owned assets. They’ll pay the price while the crooks walk away scot-free.
Why isn’t the U.S. economy in a depression right now? The number one reason is because the federal government has stolen more than five trillion dollars from future generations since Barack Obama was elected and has used that money to pump up our grossly inflated standard of living. Whether the federal government spends money wisely or foolishly, the truth is that the vast majority of it still ends up in the pockets of the American people who then use it to buy the things they need for their daily lives. If the U.S. government had not borrowed and spent an extra five trillion dollars that we did not have over the past several years, we would be in the middle of a rip-roaring economic depression right now. So any talk that Barack Obama is “improving the economy” is a total farce. It is a five trillion dollar lie. The reality is that Barack Obama and the U.S. Congress have been stealing trillions of dollars from future generations in order to make things tolerable in the present. If the federal government adopted a balanced budget next year, the debt-fueled prosperity that we are currently enjoying would start disappearing very rapidly and all hell would break loose in America.
At this point, the U.S. national debt is over 15.7 trillion dollars.
When Ronald Reagan took office it was less than a trillion dollars.
If you were to divide the national debt up equally, it would come to more than $50,000 for every man, woman and child in the United States.
So the share of the national debt for an average family of four would be about $200,000.
When the government borrows and spends money that it does not have, that increases the amount of dollars in circulation and it causes GDP to go up.
That is one of the reasons why our politicians like to borrow and spend money that we do not have. It makes the economic statistics look good. They can point to those economic statistics as a reason to send them back for another term.
This is a major flaw in our system. Most of our politicians do not care about how they are raping future generations financially. Most of them just care about getting elected again.
If you will notice carefully, neither Mitt Romney nor Barack Obama are promising to balance the budget any time soon. Like so many politicians in the past, they promise to do it “eventually”, but “eventually” never arrives.
According to a recent article in the Washington Times, Mitt Romney declared during a recent campaign appearance that he has no plans to balance the federal budget in his first year….
“My job is to get America back on track to have a balanced budget. Now I’m not going to cut $1 trillion in the first year”
Why would he say that?
Why wouldn’t he want to balance the budget?
He went on to explain that….
“The reason,” he explained, “is taking a trillion dollars out of a $15 trillion economy would cause our economy to shrink [and] would put a lot of people out of work.”
Romney is right about this. Taking a trillion dollars out of a 15 trillion dollar economy would plunge us into an economic nightmare.
And that would make him look bad.
Of course if Obama wins the election we can just expect more of the same from him as well.
For example, just check out what White House Chief of Staff Jack Lew had to say about balancing the budget recently….
“The time for austerity is not today,” Lew told NBC News “Meet the Press.” “If we were to put in austerity measures right now, it would take the economy in the wrong way.”
Why is the time for austerity not today?
It is because the 2012 election is coming up and Obama wants the economic statistics to look good.
But can you blame our politicians for being cowardly?
Just look at what is happening in Greece. After several years of austerity they are in the midst of a full-blown economic depression and they still have not balanced their budget.
Do we want to end up like Greece?
Most Americans do not realize this, but the U.S. already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.
So why haven’t we collapsed yet?
Well, because we continue to borrow larger and larger amounts of money.
It took from the founding of America until 1995 for the federal government to accumulate 5 trillion dollars of debt.
Under Obama, we have accumulated more than 5 trillion dollars of new debt in just over 3 years.
Amazingly, Obama has added more to the national debt than George W. Bush did during his entire 8 year term.
And let there be no mistake – George W. Bush was a wild spender. A fiscal conservative he most certainly was not.
But Barack Obama does not seem troubled by any of this.
Barack Obama is prancing about the countryside touting his great “economic plan”, but the truth is that the only reason the economy has not totally collapsed is because he is stealing 150 million dollars an hour from our children and our grandchildren.
Sadly, most Americans don’t understand that the current level of prosperity that we are enjoying is a grand illusion. Most Americans still expect things to return to the way that they used to be, and they are increasingly becoming angry that it is taking so long to get back there.
In fact, a whole host of recent surveys have shown that Americans are very dissatisfied with the direction the economy is heading in….
Four recent surveys have found that on average only 28% of Americans are satisfied with the condition of the country, while 70% are dissatisfied. Three recent surveys have found that between 69% and 83% of Americans believe that the country is still in recession (it isn’t), and only half believe that a recovery is under way.
What they don’t realize is that if we were not massively ripping off our kids and our grandkids things would be much, much worse.
Thomas Jefferson understood that government borrowing is essentially the same as theft from future generations.
He once made the following statement….
And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.
What we are doing to our children and our grandchildren is so immoral that it is hard to put into words.
We are running up trillions upon trillions of dollars of debt in their name just so that our lives can be more comfortable right now.
How could we be so selfish?
The sad thing is that even with all of this reckless spending our economy is still not in great shape.
-Today, approximately 48 percent of all Americans are currently either considered to be “low income” or are living in poverty.
-Back in 1960, social welfare benefits made up approximately 10 percent of all salaries and wages. In the year 2000, social welfare benefits made up approximately 21 percent of all salaries and wages. Today, social welfare benefits make up approximately 35 percent of all salaries and wages.
-The United States actually has a higher percentage of workers doing low wage work than any other major industrialized nation does.
-Every year now, we see millions of Americans fall out of the middle class. In 2010, 2.6 million more Americansdescended into poverty. That was the largest increase that we have seen since the U.S. government began keeping statistics on this back in 1959.
-At this point, approximately 22 percent of all American children are living in poverty.
-When Barack Obama took office, there were 32 million Americans on food stamps. Now, there are more than 46 million Americans on food stamps.
So how much worse would things be if a trillion dollars of federal spending was suddenly removed from the economy?
Are you starting to get the picture?
As bad as things are right now, they are about to get a whole lot worse.
So why can’t we just keep on borrowing and spending forever?
Well, just like Greece found out, debt always catches up with you eventually.
During fiscal 2011, the U.S. government spent over 454 billion dollars just on interest on the national debt.
But just like we are seeing in Europe, if confidence in U.S. government debt starts to disappear the U.S. government could end up facing much higher interest rates to borrow money.
If the average rate on U.S. government debt only rose to 7 percent (in the past it has actually been much higher than that), then the U.S. government would be spending about 1.1 trillion dollars a year just on interest on the national debt.
So if we were spending 1.1 trillion dollars just on interest, that would be close to half of all the revenue the federal government brings in.
Right now, the Federal Reserve is manipulating the system in a desperate attempt to keep interest rates down. During 2011, the Federal Reserve bought up approximately 61 percent of all government debt issued by the U.S. Treasury Department.
But most Americans have no idea how fragile our financial system is.
Most Americans just assume that we will always be the greatest economy on the planet and that there is nothing to be worried about.
Sadly, one way or another this debt bubble is going to burst and then our debt-fueled false prosperity is going to disappear.
Most Americans are not going to understand what is happening and they are going to go absolutely nuts.
Source: The Economic Collapse
As you might have noticed, the stock market is falling like a stone. As of 9 AM PST, the Dow Jones has dropped 172 points while all the other indices are down sharply. German 2-year debt (bund) has dipped below 0% this morning at auction, signalling an acceleration in the bank run taking place in southern Europe. Depositors in Spain, Greece, Italy, Portugal, etc would rather take a loss on their investment, then risk not their money back at all. The European Central Bank (ECB) does not guarantee deposits, so people are withdrawing their money en masse and getting out of Dodge pronto. What we’re seeing is a real-time panic.
The ostensible trigger for the panic is known, but you won’t read about it in the financial media where the news is dumbed down to the point of incoherence. What’s really going on is that the German central bank (The Bundesbank) has indicated that it’s ready to pull the plug on Greece which means that future bailouts will probably not be forthcoming. That’s bad. It means that Greece will run out of money some time in June; their banking system will implode, and the “birthplace of democracy” will be reduced to 3rd world status overnight. Here’s a blurb from the Bundesbank’s communique:
“Current developments in Greece are extremely worrying. Greece is threatening not to implement the reform and consolidation measures that were agreed in return for the large-scale aid programmes.
This jeopardises the continued provision of assistance. Greece would have to bear the consequences of such a scenario. The challenges this would create for the euro area and Germany would be considerable, but manageable given prudent crisis management. By contrast, a significant dilution of existing agreements would damage confidence in all euro-area agreements and treaties and strongly weaken incentives for national reform and consolidation measures. In such circumstances the institutional status quo comprising liability, control and individual responsibility of member states would be fundamentally called into question.
When the Eurosystem provided Greece with large amounts of liquidity, it trusted that the programs would be implemented and thereby ultimately assumed considerable risks. In the light of the current situation, it should not significantly increase these risks. Instead, the parliaments and governments of the member states should decide on the manner in which any further financial assistance is provided and therefore whether the associated risks should be assumed.”
Okay. So German central bankers don’t want to wait until the June elections in Greece to decide whether to provide more money or not. They’re throwing in the towel now. No more money. No more bailouts. No more Mr. Niceguy. End of story. But what does that mean? Does it mean that the whole global financial system is headed back into the shitter again like after Lehman Brothers?
No one knows for sure, but there’s bound to be a few bumps in the road, don’t you think? Take a look at this from Bloomberg today (Wed):
“Europe’s banks, are sitting on $1.19 trillion of debt to Spain, Portugal, Italy and Ireland, are facing a wave of losses if Greece abandons the euro. While lenders have increased capital buffers, written down Greek bonds and used central-bank loans to help refinance units in southern Europe, they remain vulnerable to the contagion that might follow a withdrawal, investors say. Even with more than two years of preparation, banks still are at risk of deposit flight and rising defaults in other indebted euro nations.” (Bloomberg)
Can you really slash a trillion bucks out of the rotting corpse of the EU banking system and still keep things running smoothly?
Don’t bet on it. Here’s more from Bloomberg:
“The ECB’s unprecedented provision of 1.02 trillion euros in three-year cash in December and February helped calm financial markets in the first quarter by removing concern that banks unwilling to lend to one another would run out of cash. Lenders in Spain and Italy also used the funds to buy sovereign debt, reducing government borrowing costs….
Lenders probably would need another 800 billion-euro liquidity lifeline from the ECB to help stem contagion from a Greek exit, Citigroup analysts estimated in a May 17 note….” (Bloomberg)
That’s right, the EU banks were gifted over 1 trillion euros 3 months ago, and they’re still too undercapitalized to weather the storm of a Greek default. Nice, eh? So, the whole system is just an empty gourd, right? They’re broke, so the ECB will have to print up another 800 bil just to keep the house of cards from collapsing in a heap.
Getting worried yet?
US Treasuries are also rallying big today. In fact, the yield on the 10-year –which hit a record low last week–is on its way back down indicating that investors are freaking scared-out-of-their-minds. In real terms, investors are now socking money into 10-year Treasuries knowing that (inflation adjusted) they’ll get LESS money back then they put in.
How do you like them apples? That’s what I call a full-blown panic! And yet, you ain’t hearing a blasted thing about it on the news, right? Why would that be?
Here’s a little icing on the cake from Bloomberg:
“Greece may have only a 46-hour window of opportunity should it need to plot a route out of the euro.
That’s how much time the country’s leaders would probably have to enact any departure from the single currency while global markets are largely closed, from the end of trading in New York on a Friday to Monday’s market opening ….
“I am completely convinced they could not orchestrate an orderly exit,” said Erik Nielsen, chief economist at UniCredit SpA in London. “This is a country that can’t implement laws, so how in the world are they going to secretly agree to print money, control the banks, control capital flows and think this is going to be orderly? It’s completely impossible.” …
“There is no reason to think there won’t be riots and violence,” said Lefteris Farmakis, a strategist at Nomura International Plc in London. “It would be a pretty disastrous situation. People have no understanding of the consequences of a euro exit.” (“War-Gaming Greek Euro Exit Shows Hazards in 46-Hour Weekend”, Bloomberg)
Riots, street violence, skyrocketing unemployment, grinding poverty…the whole schmeer. And what’s the most likely scenario for Greece after all that?
Well, probably another military coup backed by President Hopium and his band of CIA merry pranksters, right?
Okay, my bad. I don’t want to polarize all the Obama fans, but, Geez Louise, things are looking mighty grim for the poor Greeks, don’t you think?
Of course, it all could go smoothly “without a hitch”; no credit crunch, no bank runs, no flight to safety, no crashing stock markets, no decades of struggle and social unrest, no splitting up of the eurozone, no ethnic animosities, no uber-nationalism, no right wing fanaticism, no border skirmishes or armed hostilities, no revolutions, no depression, no rise of fascism…just a smooth transition to a new, slimmed-down version of the EZ. After all, that’s what Germany is expecting. And they could be right.
But, probably not.
After the Greek elections struck fear into the hearts of the global banksters, the fallout remains uncertain. If the next Greek election produces an anti-austerity government, Greece will almost certainly make a speedy exit from the euro. If this happens — and it is looking increasingly inevitable — the consequences for the global economy are spectacularly gloomy. Yet U.S. media and U.S. politicians are largely silent on the issue, almost as if nothing were happening.
What will happen when Greece leaves the Euro? Foreign banks hold over $90 billion in Greek debt in the public and in the private sectors. These enormous losses could very well bring down banks in Europe and abroad.
Also, the struggling Euro countries such as Italy, Spain, Portugal and Ireland will see their borrowing costs skyrocket, since the wealthy will be more reluctant to waste anymore investment money on risky Euro countries, guaranteeing a further downward spiral of bailouts and bankruptcy.
How likely is a Greek euro exit? The conservative Economist magazine reports:
“If Greece rejects the second bail-out or falls drastically behind in its program [of debt payments and public sector cuts], its exit could become inevitable.”
This scenario appears increasingly likely, as Greek voters have tired of supporting politicians that continue to attack the majority of voters’ living standards through massive austerity policies (cuts to jobs, social programs and the public sector in general).
How would the U.S. be affected by a European Union meltdown? The Bank for International Settlements claims that U.S. banks have loaned $96.8 billion to the weakest European nations in the public and private sector, with an additional $275.8 billion to German and French banks, who would suffer directly if the weak nations drowned.
Furthermore, the European Union is the U.S.’ largest trading partner; U.S. exports to the EU would instantly plummet if the above scenario were played out.
Which brings us to the silence of the U.S. politicians on the issue. The giant austerity measures that are driving Europe to the edge of revolution have been delayed on the federal level in the U.S. until after the November elections. Then, the seldom discussed budget “sequesters” will go into effect — automatic cuts to federal spending of $100 billion, every year until 2021.
Also, after the election federally enhanced unemployment insurance expires, as does the federal payroll tax cut. Obama’s stimulus plan that supported states and city governments petered out at the end of 2011, adding pain to the ongoing deficit crunch nationwide.
It’s possible that the U.S. may already be re-entering an “official” recession, though the jobs recession never left; the April jobs report showed that only 63.6 percent of people in the U.S. are either employed or actively looking for work, the lowest in more than three decades.
U.S. politicians — both Democrats and Republicans — are united in a strategy to combat the weakening economy by resorting to the European strategy of austerity. Both parties have already worked together to cut 600,000 government jobs (mostly local) since 2009, destroying the services these workers deliver in the process (education has been most targeted).
These numbers will balloon when the effects of Europe’s plight reaches America’s shores. The political silence over this fact is a good strategy for U.S. corporate political representatives; the more unprepared working people are for austerity measures, the easier they are to implement (what Naomi Klein calls the Shock Doctrine).
Therefore, working people in the U.S. need to learn to speak Greek, and adopt an increasingly popular slogan that rejects austerity measures: Tax the Rich! In other words, make the rich pay for the crisis they created. In practice this means that, instead of massive job reductions, cuts to education and health care, taxes on the wealthy and corporations should be raised; the banks should be put under public control rather than being bailed out with public money; the public sector should be fully funded and expanded rather than privatized and slashed.
Austerity is when the wealthy attempt to push the effects of their recessions onto the backs of working people, who need only to collectively push back and force the 1% to pay instead.
Committing Financial Suicide To Appease Big Finance…
Money might “make the world go ’round”, but it’s not going to stop the eurozone from breaking apart. That’s the lesson investors learned on Tuesday when global stock markets plunged on news that yields on Spanish and Italian debt had again entered the red zone. Stocks rebounded on Wednesday, but to little effect, after all, the cat is out of the bag. Now everyone knows that the European Central Bank’s 1 trillion euro ”adrenalin rush” (Long-Tern Refinancing Operation or LTRO) is a short-term fix that won’t relieve the debt troubles of struggling countries in the south or even reduce the prospects of a vicious credit crunch in the second half of the year. (As of Friday morning, Spanish 10-year bond yields are back in the nosebleed section, 5.92 percent, a rate which most economists see as “unsustainable”.)
So, what exactly did the LTRO achieve anyway?
Not much, it appears. While the lavish 3-year low interest loans allowed a significant number of underwater banks to roll over their debts; it did not address the eurozone’s institutional flaws, or –as economists Simon Tilford and Philip Whyte say– “reverse the increasingly perverse and self-defeating policies that the region is pursuing.” Policymakers in Frankfurt and Brussels have refused to heed the warnings of competent economists and other experts who’ve reiterated ad nauseam that “a monetary union outside a fiscal union is deeply unstable.” What’s needed is greater “fiscal integration and debt mutualisation” they advize. But the ECB will have none of it. The Central Bank has decided to pursue its own blinkered strategy and use the crisis to push through excruciating anti-labor and privatization reforms that will help to divert more capital to big finance. The results speak for themselves. Spain is marching headlong into a depression.
To say that Spain’s financial situation is dire would be an understatement. According to International Finance Review:
“Covered bond syndicate bankers are expecting weak jobs data out of the US and a persistent deterioration of Spanish bank credit to weigh heavily on the new issue market for the foreseeable future. It’s a backdrop that is likely to lock Spanish banks out of the primary market and deprive the country’s banks of a funding plan B, according to one banker….
“The Spanish are completely shut out of the market,” said a covered bond trader. “You won’t get any momentum for a deal, and for investors, they have no incentive to buy into a deal when the market is declining.” (“Spanish banks face funding lock-out”, IFR)
Also, while unemployment across Europe has risen to its highest point in more than 14 years, (17.3 million people) in Spain, joblessness has soared to 23 percent, and among young people, it’s nearly 50 percent. An entire generation is being sacrificed so the 1 percent can grab a greater portion of the wealth.
If Spain is unable to manage its finances due to rising bond yields, then the eurozone will surely fail. The country is simply too big to bail out. It’s more than twice the size of Greece, Ireland and Portugal combined. And Spain’s three largest banks — Banco Santander, BBVA, and La Caixa, “have combined assets of about $2.7 trillion. Spain’s GDP is just about $1.4 trillion. In other words: Spain’s three biggest banks are nearly twice as big as the entire Spanish economy.” (CNBC)
Spain’s problems go far beyond its collapsing real estate market, its skyhigh unemployment, its widening debt-to-GDP ratio, and its teetering banking system. A historic structural adjustment program (“Austerity measures”) implemented by newly-elected Prime Minister Mariano Rajoy has accelerated the rate of decline by slashing spending and thrusting the economy into a deflationary spiral. Here’s a clip from Bloomberg:
“Under EU orders, Spain is promising what might be the tightest fiscal squeeze that it or any other European economy has ever faced. The new plan calls for the budget deficit to fall from 8.5 percent of gross domestic product to 5.3 percent this year. Since the economy is already shrinking, this requires a discretionary fiscal tightening of roughly 4 percent of GDP — with the unemployment rate already standing at about 23 percent.” (“Spain Not Greece Is the Real Test for the European Union,” Bloomberg)
This is fiscal suicide authored by rightwing fanatics who want to use the ongoing crisis to impose their own business-friendly economic model on Europe. As journalist Pepe Escobar says in a recent article, (It’s) “a counter-reformation that erases with a single stroke many labour and union rights acquired by the working class in decades and generations”. That includes extremely harsh cuts in health, education and social services….”
Here’s more from Escobar:
“The catalogue of Spain’s “austerity” is the usual catalogue of neoliberalism in trouble. A previous, nominally socialist and now an ultra-conservative government have furiously decimated unemployment, retirement and severance benefits; turned virtually all labour contracts into precariousness hell; steeply raised fees for education and transportation; vastly militarised the police; and spent fortunes to bail out banks….” (“All the pain in Spain”, Pepe Escobar, Aljazeera)
Now that the ECB’s lending program (LTRO) has failed and Spanish banks are more indebted than ever (Spanish banks borrowed more money from the ECB than any other country—227.6 billion euros or $300 billion); what’s next?
For starters, ECB president Mario Draghi will be forced to revive the vastly unpopular Securities Markets Program (SMP) and purchase more Spanish debt outright. Investors will see this as a sign of desperation since Draghi scotched the idea of reviving the program just last week. Now he will have to reverse himself and hastily resume the EZ’s version of QE.
Restarting the program will set off fireworks in Berlin where hardliners at the Bundesbank will fight tooth-and-nail to stop Draghi in his tracks. Even so, the wily ex-G-SAX managing director Draghi will undoubtedly outmaneuver his rivals and the bailout will go forward. That means big finance’s plan to crush organised labor, savage the social safety net and reduce EZ workers to a life of debt peonage will continue apace.
Not so fast. Those that are publicly declaring that an economic recovery has arrived are ignoring a whole host of numbers that indicate that the U.S. economy is in absolutely horrendous shape. The truth is that the health of an economy should not be measured by how well the stock market is doing. Rather, the truth health of an economy should be evaluated by looking at numbers for things like jobs, housing, poverty and debt. Some of the latest economic statistics indicate that unemployment is getting a little bit worse, that the housing market continues to deteriorate, that poverty in America continues to soar and that our debt problem is worse than ever. If we were truly experiencing the kind of economic recovery that the United States has experienced after every other post-World War II recession we would see a sharp improvement across the board in most of our economic statistics. But that simply is not happening. Sadly, this is about as much of an “economic recovery” as we are going to get because soon the economy will be getting much worse. So enjoy this period of relative stability while you can.
The Obama administration would have us believe that unemployment in the United States has declined, but the truth is that the percentage of working age Americans that are employed has stayed very, very flat for more than two years and now there are some measures of unemployment that are actually getting worse.
For example, according to Gallup the unemployment rate in the United States has risen from 8.5% in December to 8.6% in January to 9.1% in February. The Obama administration would have us believe that it is actually going the other direction.
Initial unemployment claims are rising again. For the week ending March 3rd, they increased by 8,000 over the previous week to 362,000. This is not the kind of good news that people were hoping for.
What the U.S. economy could really use are millions of good jobs. But those are being shipped out of the country at a staggering pace.
Right now there are millions of Americans in their prime working years that are sitting at home wondering what to do with their lives. The average duration of unemployment in the United States continues to hover near a record high, and if we were truly experiencing an economic recovery it should have been falling by now.
But a lot of Americans have bought into the propaganda about an economic recovery and they are out running up huge amounts of debt once again. In January, consumer credit increased by much more than expected. The following is from a recent Reuters report….
Nonrevolving credit, which includes auto loans as well as student loans made by the government, rose $20.723 billion during the month. That was the biggest increase in dollar terms since November 2001, when credit was surging in the wake of the September 11 attacks in New York and Washington.
Don’t fall into the trap of debt slavery. During the last recession millions of Americans lost their homes and most of what they owned because they got overextended.
Don’t do it.
The U.S. housing market continues to deeply struggle as well. If we were really in an economic recovery housing would be bouncing back. But that is not happening. Just consider the following facts….
*The number of new homes sold in the United States continues to hover near a record low.
*U.S. home prices in the 4th quarter of 2011 were four percent lower than they were during the 4th quarter of 2010.
*According to CoreLogic, 22.8 percent of all homes with a mortgage in the United States were in negative equity as of the end of the 4th quarter of 2011. That was an increase from 22.1 percent in the third quarter.
Why are things still getting worse for the U.S housing market?
That is a really good question.
We should have seen some improvement by now.
But it isn’t happening.
Also, poverty in America continues to explode.
For example, the number of Americans on food stamps has increased to 46.5 million - a brand new all-time record.
If we really were in an economic recovery, wouldn’t that number be going down?
We should be thankful that the U.S. economy is not declining as rapidly as it was during 2008 and 2009. But what we are experiencing right now is not an economic recovery. It is simply just a bubble of false hope.
The big problem is that our nation is covered in an ocean of constantly expanding debt.
U.S. consumers are drowning in debt, U.S. businesses have pushed debt levels to the red line, and the U.S. financial system is massively overleveraged.
Of course government debt is our biggest debt problem of all.
All over the nation, state and local governments are on the verge of financial ruin.
If we were in the middle of an economic recovery, so many states would not be in crisis mode. A recent article in the Los Angeles Times declared that “California could run out of cash in March“. As the economy continues to crumble we are going to hear a lot more of this kind of thing.
A lot of local governments around the nation are on the verge of total financial collapse. Stockton, California has announced that they will be defaulting on some debt payments, and Suffolk County in New York recently declared a fiscal emergency after discovering that it would rack up more than 500 million dollars of debt between 2011 and 2013.
Keep your eyes open for more news items like this in the months ahead.
Of course the biggest problem of all is the U.S. national debt and it continues to rapidly get worse.
According to the Congressional Budget Office, the U.S. government had a budget deficit of 229 billion dollars in the month of February. That is the worst one month budget deficit in the history of the United States.
The Congressional Budget Office also says that the U.S. government is now borrowing 42 cents of every single dollar that it spends.
The U.S. national debt has gotten more than 59 times larger since 1950.
The U.S. national debt is now more than 22 times larger than it was when Jimmy Carter became president.
Are there any words in the English language that are strong enough to describe how foolish we have been?
Of course we won’t be able to accumulate so much debt indefinitely. At some point the trillion dollar deficits will stop and our false prosperity will disappear.
If you want to get an idea of what happens then, just take a look at Greece.
But Barack Obama and most members of the U.S. Congress don’t really care about what they are doing to our future.
What they care about is winning the next election so that they can continue living their fabulous lives.
Barack Obama is supposed to be taking care of the American people, but instead he has been very busy taking care of the people who helped him get elected. Politics in America is all about money. Just check out the following very short excerpt from a recent article in the Washington Post….
More than half of Obama’s 47 biggest fundraisers, those who collected at least $500,000 for his campaign, have been given administration jobs. Nine more have been appointed to presidential boards and committees.
At least 24 Obama bundlers were given posts as foreign ambassadors, including in Finland, Australia, Portugal and Luxembourg. Among them is Don Beyer, a former Virginia lieutenant governor who serves as ambassador to Switzerland and Liechtenstein.
Washington D.C. is deeply corrupt and if you are waiting for our politicians to fix our problems you are going to be deeply disappointed.
The federal government is not going to save you.
Our politicians are not going to save you.
You better figure out how you are going to take care of yourself and your family in the years ahead because this is about as good as things are going to get.
This “economic recovery” is about to end and more pain is about to begin.
Source: The Economic Collapse
Here in Argentina, when we watch the terrible things that are happening today in Greece, we can only exclaim, “Hey!! That’s exactly what happened in Argentina in 2001 and 2002…!”
A decade ago, Argentina too went through a systemic Sovereign Public Debt collapse resulting in social turmoil, worker hardship, rioting and street fights with the police.
Some months before Argentina exploded, then-President Fernando de la Rúa – forced to resign at the height of the 2001 crisis – had called back as finance minister the notorious pro-banker, Trilateral Commission member and Rockefeller/Soros/Rhodes protégée Domingo Cavallo.
Cavallo was the gruesome architect of Argentina’s political and economic capitulation to the US and UK when he was President Carlos Menem’s foreign minister and economy minister in the ’90s.
Menem and Cavallo are primarily responsible for Argentina’s signing of a formal Treaty of Capitulation with the UK/US after the 1982 Falklands War, opening up our economy to unrestricted privatization, deregulation and grossly excessive US Dollar-indebtedness, almost tripling our sovereign debt in a few short years (see my February 11, 2012 article British Laughter in the Falklands).
The Plan? Prepare Argentina for planned weakening, bankster take-over and collapse, so that a new weakening-takeover-collapse cycle could begin. In 2001, Cavallo was back to finish his work…
During that very hot summer in December 2001, true to its Latin temperament, Argentina even had four (yes, 4!) presidents in just one week. One of them, Adolfo Rodriguez Sáa, who only lasted three days, at least did one thing right, even if he did it the wrong way: he declared Argentina’s default on its sovereign debt.
All hell broke loose! The international bankers and IMF did everything they could to break Argentina’s back; global media pundits predicted all kinds of impending catastrophes. Debt default meant Argentina would have to weather the pain and agony alone, being cast out by the “international financial community”.
‘You’re not the boss of me!’
But no matter how bad it got, it would always be better to do that without the bankers, without the IMF’s, European Central Bank’s, US Fed’s and US Treasury’s “help”. Better to sort out your mess on your own, than to have parasitic banker vultures carving out their pound of flesh from your nation’s decaying social and economic body.
And how bad did it get in 2002? A 40 per cent drop in GDP; 30 per cent unemployment; 50 per cent of the population fell below the poverty line; dramatic, almost overnight, devaluation against the US Dollar from 1 peso per dollar to 4 pesos per dollar (then it tapered down to 3 pesos per dollar); if you had a US dollar Bank account, the government forced you to change it into pesos at the rate of 1.40 pesos per dollar.
What did Argentina’s government do wrong? In the months leading to collapse it bowed to all the bankers and IMF-mandated measures and “recipes”, which were actually the very cause of collapse: Argentina was loaned far more than it could pay back…. And the banker knew it! This was described in our December 19, 2011 article, Argentina: Tango Lessons.
Successive governments since then have continued to be functional to banker interests by rolling over debt 30 to 40 years, aggregating huge interest and in 2006 paying the full debt to the IMF – almost US$10 billion in full, cash and in US dollars (sole entity given most-favoured creditor status).
Same vultures circling Greece
Today, Greece is confronted with a similarly tough decision. Either it keeps its sovereignty, or it capitulates to the “Vulture Troika” – the European Central Bank, European Commission and International Monetary Fund – who work for the Bankers, not the People.
Not surprisingly, today we find that Greece too has a Trilateral Commission Rockefeller/Rothschild man at the helm: Lucas Papademos who is doing the same things Argentina did in 2001/2.
Argentina not only suffered Cavallo, but President De la Rúa himself was co-founder of the local Global Power Masters lobby, CARI – Argentine International Relations Council – local branch of the New York-based Council on Foreign Relations, networking with the Trilateral Commission / Bilderberg mafia.
Greece today should do what Argentina did a decade ago: better to endure pain and hardship, and sort out the mess made by your politicians in connivance with international bankers on your own, wielding whatever shred of sovereignty you still have than allowing the Banker Vultures sitting in Frankfurt, New York and London decide your future.
It’s the Neocolonial Private Power Domination Model, stupid!
Or do you think it’s just bad luck, bad judgment and coincidence that countries – Greece, Argentina, Spain, Italy, Portugal, Brazil, Mexico, Iceland, Ireland, Russia, Malaysia, Ukraine, Indonesia, South Korea, Thailand, France, even the US and UK – always borrow too much from the bankers and then “discover” that they cannot pay it back and that, symmetrically, the same bankers – CitiCorp, HSBC, Deutsche, Commerz, BNP, Goldman Sachs, Bank of America, JPMorganChase, BBVA lend too much to countries and then “discover” they cannot collect?
No! That is the very yellow-brick road that leads to the Emerald City of “debt restructuring”, “debt refinancing”, and “sovereign debt bond mega-swaps” that snowball sovereign debt, spreading it over 20, 40 or more years into the future. That guarantees unimaginably colossal interest profits for the Mega-Bankers and for all those nice politicians, media players, traders and brokers, without whom that would not be possible.
This is a Model. It must keep rolling and rolling and rolling… As this Monster Machine steams forwards, it completely tramples on, overruns, destroys, flattens and obliterates people, jobs, workers, health services, pensions, education, national security and just about everything human on its path. Run by parasitic usurer technocrats, it does not care what it destroys because it has no ethics; no Christian, Muslim or Buddhist morals. It only worships a greedy golden idol of money, money and more money. This is 21st-century Money Power Slavery.
Three generations of Argentines saw hopes dashed and dreams thwarted by this Monster Machine, suffering the hardship, woes and humiliations that come when countries give up sovereignty.
Bring back the drach!
So, Greece: Just default on your “sovereign debt”! Just revert to the drachma! Just say “No, thanks!” to the German bankers and the Troika Vultures.
Please, Greece: just say “No!” to your Trilateral Commission president!
You will be setting a strong precedent for your European neighbours. Like Spain, which is hurting so badly right now for similar reasons. Like Italy, with its Trilateral Commission Prime Minister Mario Monti (also Trilateral’s European Chairman!).
Greece, the Cradle of Democracy, can teach the world a lesson in True Democracy by kicking these parasites out of the country, which will hopefully trigger kicking them out of Europe and one day, kicking them out of the global economy.
Because what Greece and Argentina and Italy and Spain suffer today is not True Democracy, but rather a distorted bastard imitation that systematically yields control to the Global Power Masters at the Trilateral Commission, Bilderberg and Mega-Banking Overworld. They run the whole “democracy show”, whereby all countries end up having “the best democracy that money can buy”… which is no democracy at all…
The Money Power juggernaut is steaming full speed towards us all. If Greece falls, who’ll be next? Spain? Italy? Portugal? Argentina (yet again!!!)?
So what if Greece’s reverting to the drachma marks the beginning of the end for the euro? Let Italy revert to the lira, Spain to the peseta, Portugal to the escudo…! A National Currency is a key National Sovereignty factor.
All governments should understand that you either govern for the people and against the bankers; or you govern for the bankers and against the people.
Source: Adrian Salbuchi for RT
Do you want to see what a 21st century economic depression looks like? Just look at Greece. Once upon a time, the Greek economy was thriving, the Greek government was borrowing money like there was no tomorrow and Greek citizens were thoroughly enjoying the bubble of false prosperity that all that debt created. Those that warned that Greece was headed for a financial collapse were laughed at and were called “doom and gloomers”. Well, nobody is laughing now. You see, the truth is that debt is a very cruel master. Greeks were able to live way beyond their means for many, many years but eventually a day of reckoning arrived. At this point, the Greek economy has been in a recession for five years in a row, and the economic crisis in that country is rapidly getting even worse. It was just recently announced that the overall rate of unemployment in Greece has soared above 20 percent and the youth unemployment rate has risen to an astounding 48 percent. One out of every five retail stores has been shut down and parents are literally abandoning children in the streets. The frightening thing is that this is just the beginning. Things are going to get a lot worse in Greece. And in case you haven’t been paying attention, these kinds of conditions are coming to the United States as well. We are heading down the exact same road as Greece went down, and the economic pain that this country is eventually going to suffer is going to be beyond anything that most Americans would dare to imagine.
All debt spirals eventually come to an end. For years, Greece borrowed huge amounts of very cheap money, but there came a point when the debt became absolutely strangling and the rest of the world refused to lend the Greek government money at such cheap rates anymore.
Greece would have defaulted long before now if the EU and the IMF had not stepped in to bail them out. But along with those bailouts came strings. The EU and the IMF insisted that the Greek government cut spending and raise taxes.
Well, those spending cuts and tax increases caused the economy to slow down. Tax revenues decreased and deficit reduction targets were missed. So the EU and the IMF insisted on even more spending cuts and tax increases.
Even after all of the spending cuts and all of the tax increases that we have seen, the debt to GDP ratio in Greece is still higher than it was before the crisis began. Today, the Greek national debt is sitting at 142 percent of GDP.
Now the EU and the IMF are demanding even more austerity measures before they will release any more bailout money.
Needless to say, the Greek people are pretty much exasperated by all of this. They created this mess by going into so much debt, but they certainly don’t like the solutions that are being imposed upon them.
Protesters in Greece are absolutely outraged that the EU and the IMF are now demanding a 22 percent reduction in the minimum wage.
Most families in Greece are just barely surviving at this point. Unfortunately, Greece is probably looking at depression conditions for many years to come.
Over the past three years, the size of the Greek economy has shrunk by 16 percent.
In 2012, it is being projected that the Greek economy will shrink by another 5 percent.
Sadly, that projection is probably way too optimistic.
Over the past couple of months, it has been like someone has pulled the rug out from under the Greek economy. Just check out the following numbers from an article in the Telegraph by Ambrose Evans-Pritchard….
Another normal day at the Hellenic Statistical Authority.
We learn that:
Greece’s manufacturing output contracted by 15.5pc in December from a year earlier.
Industrial output fell 11.3pc, compared to minus 7.8pc in November.
Unemployment jumped to 20.9pc in November, up from 18.2pc a month earlier.
I have little further to add. This is what a death spiral looks like.
Can you imagine unemployment going up by 2.7 percent in one month?
This is what a 21st century economic depression looks like.
And needless to say, civil unrest is rampant in Greece.
The following is how a USA Today article described some of the protests that we saw in Greece this week….
Scores of youths, in hoods and gas masks, used sledge hammers to smash up marble paving stones in Athens’ main Syntagma Square before hurling the rubble at riot police.
The country’s two biggest labor unions stopped railway, ferry and public transport schedules, and hospitals worked on skeleton staff while most public services were disrupted. Unions were planning protests in Athens and other cities around midday.
Greek citizens are exasperated by the endless rounds of austerity that are being imposed upon them. They wonder how far all of this is going to go.
How much higher can taxes go in Greece? Greece already has tax rates that are among the highest in Europe….
Greece has the third highest rate of VAT in Europe, second highest gas/petrol tax, third highest tax on social insurance contributions, fifth highest VAT on alcohol, highest property tax and one of the worst corporate tax rates, without the quality of living or competitiveness to match.
How much farther can government pay be cut? Greek civil servants have had their incomes slashed by about 40 percent since 2010.
How would you feel if your pay was reduced by 40 percent?
Large numbers of Greeks are rapidly reaching the end of their ropes. The following is from a recent article in the Independent….
“People are scared and haven’t really realised what’s happening yet,” George Pantsios, an electrician for the country’s public power corporation, said. He has only been receiving half of his €850 monthly wage since August. “But once we all lose our jobs and can’t feed our kids, that’s when it’ll go boom and we’ll turn into Tahrir Square.”
Instead of turning violent, others are simply giving in to despair. According tothe Daily Mail, large numbers of Greek children are being abandoned because their parents simply cannot afford to take care of them anymore. The note that one mother left with her little toddler was absolutely heartbreaking….
One mother, it said, ran away after handing over her two-year-old daughter Natasha.
Four-year-old Anna was found by a teacher clutching a note that read: ‘I will not be coming to pick up Anna today because I cannot afford to look after her. Please take good care of her. Sorry.’
Sadly, there are an increasing number of Greeks that are giving up on life entirely. The number of suicides in Greece rose by 40 percent during just one recent 12 month time period.
But we haven’t even seen the worst in Greece yet. The worst is still yet to come.
And the people of Greece are going to get angrier and angrier and angrier.
According to one recent poll, about 90 percent all of Greeks are unhappy with the interim government led by Prime Minister Lucas Papademos.
This week, that government has started to fall apart. Over just the past few days, 6 members of the 48-member government cabinet have resigned. Not only is there real doubt if the new austerity measures will be approved, there is very real doubt if this government will be able to hold together much longer.
Frustration with the EU and the IMF has reached a fever pitch in Greece. Just check out what Reuters is reporting….
In a letter obtained by Reuters on Friday, the Federation of Greek Police accused the officials of “…blackmail, covertly abolishing or eroding democracy and national sovereignty” and said one target of its warrants would be the IMF’s top official for Greece, Poul Thomsen.
So what is going to happen next in Greece?
The truth is that nobody knows.
But whatever kind of “deals” are reached, the reality is that nothing is going to keep Greece from continuing to experience depression-like conditions for quite some time.
Unfortunately, Greece is not an isolated case.
Portugal, Ireland, Italy and Spain are all going down the same path and Europe does not have enough money to bail all of them out.
To get an idea of how much money it would take to bail out the financially troubled nations of Europe, just check out this infographic that was recently posted on ZeroHedge.
A day of reckoning is coming for the United States as well. As CNBC recently noted, the U.S. debt problem is far worse than the European debt problem is.
Right now, the U.S. government is still able to borrow gigantic mountains of very cheap money and is spending money as if tomorrow will never come.
Well, just like we saw in Greece, when debt gets out of control a day of great pain eventually arrives.
What we are watching unfold in Greece right now is coming to America.
You better get ready.
Source: The Economic Collapse
“We are being asked to take even larger doses of a medicine that has proven to be deadly and to undertake commitments that do not solve the problem, but only temporarily postpone the foretold death of our economy.” – Hieronymos II, head of Greece’s Orthodox Church
While EU banks have borrowed more than $600 billion at rock bottom rates (1 percent) for up to 3 years with no-strings-attached, eurozone finance ministers are threatening to push member-state Greece into default over a paltry 325 million euros. A German-led coalition within the Eurogroup has set a 6-day deadline for Greece to agree to additional budget cuts or the struggling country will be denied 130 billion euro loan. Absent the bailout, the Greek government will run out of money sometime in late March and default. This appears to be what many in Berlin secretly seek.
Aside from the 325 million euros of cuts, Greek coalition party leaders will also be forced to make a written commitment that the terms of the agreement will be followed whether general elections are held or not. The troika (The European Commission, the IMF, and the ECB) wants to be sure that it is repaid regardless of a change in government.
Naturally, these developments have infuriated the Greek people. It’s no longer uncommon to see German flags set ablaze at demonstrations in Athens or posters of Merkel in full Nazi regalia. This latest humiliation will only add to the seething resentment that is fueling the massive labor strikes and sporadic street violence across the country. George Karatzaferis, leader of the LAOS party, (who has already said he will oppose the additional cuts) urged other countries in the European Union to challenge what he described as Germany’s domination of the union.
“We can get by without being under the German jackboot,” Karatzaferis said in a press conference following the announcement. “Like all Greeks, I am very irritated …. by this humiliation. They have stolen our pride. I cannot tolerate this. I cannot allow it, even if I have to starve.” (“Greek coalition party to oppose austerity measures”, AP)
Greece has already withstood five consecutive years of economic contraction with no sign of improvement. Unemployment has soared to a new high of 20.9 percent, the debt-to-GDP ratio is rising, and capital continues to flee the country. All of the troika’s so-called “rescue” efforts have failed. The country remains mired in a semi-permanent slump brought on by austerity measures. Greece is in the middle of a policy-generated depression.
On Thursday, all three Greek coalition party leaders agreed to accept deeper cuts to public spending in order to win approval for 130 billion bailout. The new austerity measures are a straightforward attack on working people and retirees. As The Athens News notes, it is “the most violent devaluation of labour pay during peacetime.” The provisions include “a 22 percent cut to the minimum wage, new restraints on collective bargaining, severe cutbacks on social insurance, and a 22-40 percent cut to real wages and bonuses. Also, 150,000 public workers will be sacked, and 400 million euros will be cut from public investment programs. The social safety net is being gutted while the banks are raking in billions on the carry trade–the purchasing of high-yield government debt with money they borrowed from the ECB.
Working people and pensioners are being asked to shoulder a disproportionate amount of the burden for a crisis that was precipitated by financial elites and their political lackeys. The Troika wants Greece to cut the minimum wage to less than 600 euros a month (poverty level) and abolish holiday allowances altogether. They’re also demanding that supplementary pensions be cut by 35 percent. This same war on working people is being waged in every country hit by the crisis. The agents of big finance have replaced democratically-elected leaders in Greece and Italy and launched a full-blown assault on organized labor. Here’s an excerpt from an article by Peter Schwarz titled “The looting of the Greek working class”:
“What the financial aristocracy is doing to Greece is what they intend for the whole of Europe. A social counter-revolution is taking place which was barely conceivable a few years ago. Broad layers of the population are being condemned to poverty, unemployment, sickness and even death to secure the profit demands of the international financial aristocracy.” (“The looting of the Greek working class”, World Socialist Web Site)
Greece is also being asked to surrender its sovereignty by allowing an EU budget commissioner to oversee public spending. The new commissar will see that future tax revenues will be used to pay off foreign lenders “first and foremost” before providing money for vital social services. In the event of a national emergency, lenders and bondholders will be paid before funds are allocated to help disaster victims. This is what “greater eurozone-integration” looks like in real time.
Greece’s deep structural reforms and privatizations are supposed to “increase competitiveness and growth” and to “bring the fiscal deficit to a sustainable position”, but, of course, it’s all a pipedream. The Greek economy is in worse shape now than it was two years ago when the bailouts began. And, as Der Speigel notes, the latest bailout package “will not save the country…it will only delay a Greek insolvency — and serve to create new hardships for the country’s population…”
Here’s more from the same article:
“If the country is to lastingly reduce its mountain of debt and, at some point, be able to borrow money on the capital markets again, then it needs a comprehensive debt haircut…..
Of course, things wouldn’t stop there. The euro-zone states would also have to build a bigger firewall around the remaining crisis countries in order to prevent contagion. They would have to help some banks that get into trouble as a result of a debt cut. And they would have to provide Greece with a real opportunity to get back on its feet and start growing under its own steam — in other words, a kind of Marshall Plan.” (“It’s Time To End the Greek Rescue Farce”, Speigel Online)
But EZ policymakers and central bankers don’t want “a comprehensive debt haircut”, because they’re afraid that the speculative bets made by financial institutions (CDS and sovereign bonds) may cause losses that will crash the banking system. So, they’ve put their agents in positions of power to extract as much wealth as possible from working people without precipitating a default. It’s all part of the calculation.
25 of 27 countries in the EU have also agreed to a balanced budget provision that will limit the ability of national parliaments to conduct counter-cyclical fiscal policy or reduce soaring unemployment by expanding government deficits. The so called “debt brakes”–which are strongly supported by German chancellor Angela Merkel– will lead to additional cuts in social spending and welfare while–at the same time–paving the way for deeper and more protracted recessions.
Meanwhile, the banks are held to an entirely different standard than EZ member states. Banks that are unable to procure funding via the capital markets (because no one trusts the condition of their balance sheets) are given “limitless” loans on collateral that wouldn’t fetch a bid at a flea market.
When the banks tapped into the ECB’s deep pockets for 489 billion euros in late December, they were not required to cut staff, slash bonuses, lay off workers, curtail health care or pension benefits, or appoint a budget czar to oversee how the money was spent. They were given carte blanche, even though the money they borrowed hasn’t been used to extend credit to consumers and businesses (as it was supposed to), and even though the loans merely conceal the vast losses on their stockpile of toxic bonds. This is how the ECB perpetuates the illusion of “solvency” in the eurozone. It’s all a fraud.
So, why does Greece have to grovel for $130 billion loan when the banks can just snap their fingers and get as much money as they want? And why does the IMF have one policy for Europe and another for China? This is from the Wall Street Journal:
“China should be prepared to sharply stimulate its economy if Europe’s growth falls more than anticipated, the International Monetary Fund said, adding to expectations that Beijing could turn to spending if conditions significantly worsen.
In its China economic outlook report released on Monday, the IMF urged China to run a deficit of 2% of GDP rather than looking to reduce the country’s deficit as planned, given the uncertainty in the global economy.
If Europe’s problems turned out to be worse than expected, China should hit the fiscal gas pedal harder. In that case, “China should respond with a significant fiscal package” of about 3% of GDP, the IMF said…
However, the IMF warned that Beijing should execute any fresh stimulus through its budget rather than the banking system. China used a four trillion yuan, or about $635 billion, stimulus package in 2008 to help blunt the impact of the financial crisis, in large part through bank lending.” (“IMF Urges Beijing to Prepare Stimulus”, Wall Street Journal)
So, it’s thin gruel and hairshirts for Greece, Portugal, Spain, Italy and Ireland, but lavish doses of fiscal stimulus for China? Why is that? And notice how the IMF even stipulates HOW China’s stimulus should be implemented–not through the “banking system” (monetary stimulus ala Helicopter Ben), but the old fashion way; Keynesian fiscal stimulus mainlined into the central bloodstream via the budget.
But doesn’t this just go-to-show that Troika policymakers really know that all this austerity bunkum is just nonsense?
On Jan. 26, 2012, the European Union and 22 member states signed the Anti-Counterfeiting Trade Agreement (ACTA), Japan’s Ministry of Foreign Affairs announced. They have now joined the US and seven other nations that signed the treaty last October.
Though initiated by the US, Japan is the official depository of the treaty.
Removal of the Three Strikes clause, in which users accused of three counts of piracy would be barred from the Internet, paved the way for the EU to adopt ACTA last month.
Related to ACTA, a chapter in the Trans Pacific Partnership Agreement (TPP) “would have state signatories adopt even more restrictive copyright measures than ACTA,” reports the Electronic Frontier Foundation.
Both ACTA and TPP were developed without public input and outside international trade groups, like the World Trade Organization and the Organization for Economic Cooperation and Development.
Leaked cables published by Wikileaks in 2009 exposed early drafts of ACTA, resulting in a firestorm of controversy. Those cables, coupled with later releases, showed that ACTA negotiations began in 2006 and were controversial even to participating states. An historical summary of the treaty’s progress through December can be found here.
ACTA Violates Magna Carta and US Constitution
Like PIPA and SOPA, two domestic internet censorship bills that prompted major websites to blacken their name or website in a Jan. 18th protest, ACTA allows accusers of copyright infringement to bypass judicial review.
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Ratings agency Standard & Poor’s has downgraded the government debt of France, Austria, Italy and Spain, but maintained Germany’s at the coveted “AAA” level.
The cuts, which eliminated France and Austria’s triple-A status, deal a heavy blow to the currency union’s ability to fight off a worsening debt crisis. In total, S&P cut its ratings on nine eurozone countries.
France and Austria both dropped one notch to AA+. Italy was lowered by two notches to BBB+ from A, and Spain fell to A from AA-. Portugal and Cyprus also dropped two notches. The agency also cut ratings on Malta, Slovakia and Slovenia.
The downgrades come as crucial talks on cutting Greece’s massive debt pile appeared close to collapse Friday.
Speaking on France-2 television, Finance Minister Francois Baroin confirmed that France had been lowered by one notch. That would mean a rating of AA+, the same rating the United States has had since S&P downgraded it last August.
Baroin said France had received a change to its rating “like most of the eurozone,” referring to the 17 European nations that use the euro currency.
A credit downgrade escalates the threats to Europe’s fragile financial system. It increases the costs at which the affected countries — some of which are already struggling with heavy debt loads and low growth — borrow money.
Baroin said the downgrade was “bad news” but not “a catastrophe.”
“You have to be relative, you have keep your cool,” he said. “It’s necessary not to frighten the French people about it.”
S&P had warned 15 European nations in December that they were at risk for a credit downgrade.
Earlier Friday, as rumors of a looming downgrade swirled around the financial markets, the euro hit its lowest level in more than a year and borrowing costs for European nations rose. Stock markets in Europe and the U.S. fell.
The fears of a downgrade brought a sour end to a mildly encouraging week for Europe’s heavily indebted nations and were a stark reminder that the 17-country eurozone’s debt crisis is far from over.
Earlier Friday, Italy had capped a strong week for government debt auctions, seeing its borrowing costs drop for a second day in a row as it successfully raised as much as €4.75 billion ($6.05 billion).
Spain and Italy completed successful bond auctions on Thursday, and European Central Bank president Mario Draghi noted “tentative signs of stabilization” in the region’s economy.
Credit downgrades will drive up the cost of European government debt as investors demand more compensation for holding bonds now deemed to be riskier. Higher borrowing costs puts more financial pressure on countries already contending with heavy debt burdens.
In Greece, negotiations Friday to get investors to take a voluntary cut on their Greek bond holdings appeared close to collapse, raising the specter of a potentially disastrous default by the country that kicked off Europe’s financial troubles more than two years ago.
The deal, known as the Private Sector Involvement, aims to reduce Greece’s debt by €100 billion ($127.8 billion) by swapping private creditors’ bonds with new ones of a lower value, and is a key part of a €130 billion ($166 billion) international bailout. Without it, the country could suffer a catastrophic bankruptcy that would send shock waves through the global economy.
Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos met Thursday and Friday with representatives of the Institute of International Finance, a global body representing the private bondholders. Finance ministry officials from the eurozone also met in Brussels Thursday night.
“Unfortunately, despite the efforts of Greece’s leadership, the proposal put forward … which involves an unprecedented 50% nominal reduction of Greece’s sovereign bonds in private investors’ hands and up to €100 billion of debt forgiveness — has not produced a constructive consolidated response by all parties, consistent with a voluntary exchange of Greek sovereign debt,” the IIF said in a statement.
“Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach,” it said.
Friday’s Italian auction saw investors demanding an interest rate of 4.83% to lend Italy three-year money, down from an average rate of 5.62% in the previous auction and far lower than the 7.89% in November, when the country’s financial crisis was most acute.
While Italy paid a slightly higher rate for bonds maturing in 2018, which were also sold in Friday’s auction, demand was between 1.2% and 2.2% higher than what was on offer.
The results were not as strong as those of bond auctions the previous day, when Italy raised €12 billion ($15 billion) and Spain saw huge demand for its own debt sale.
“Overall, it underscores that while all the auctions in the eurozone have been battle victories, the war is a long way from being resolved (either way),” said Marc Ostwald, strategist at Monument Securities. “These euro area auctions will continue to present themselves as market risk events for a very protracted period.”
Italy’s €1.9 trillion ($2.42 trillion) in government debt and heavy borrowing needs this year have made it a focal point of the European debt crisis.
Italy has passed austerity measures and is on a structural reform course that Premier Mario Monti claims should bring down Italy’s high bond yields, which he says are no longer warranted.
Analysts have said the successful recent bond auctions were at least in part the work of the ECB, which has inundated banks with cheap loans, giving them ready cash that at least some appear to be using to buy higher-yielding short-term government bonds.
Some 523 banks took €489 billion in credit for up to three years at a current interest cost of 1%.
7,600,000,000,000 Dollars of Debt Must Be Rolled Over In 2012…
When it comes to government debt, it is not just new debt that is the problem. Every single year, governments around the world must “roll over” gigantic mountains of debt that come due. That means that the actual borrowing that takes place each year is far greater than the yearly budget deficits that you see talked about on television. In 2012, a total of 7,600,000,000,000 dollars of debt must be rolled over by the G-7 nations, Brazil, Russia, India and China. When you add in interest payments, that number rises to over $8 trillion. And that does not even include any new borrowing that all of those nations will do in 2012. This is a debt bomb that could devastate the entire global economy at any time. Everything will be fine as long as global lenders are willing to lend these countries gigantic mountains of very cheap money. But if that changes, and there are already a multitude of signs that a massive global credit crunch has begun, it will mean a complete and total financial nightmare for the entire world.
The following list compiled by Bloomberg shows the amount of debt that these various nations must roll over in 2012….
Japan: 3,000 billion
U.S.: 2,783 billion
Italy: 428 billion
France: 367 billion
Germany: 285 billion
Canada: 221 billion
Brazil: 169 billion
U.K.: 165 billion
China: 121 billion
India: 57 billion
Russia: 13 billion
Up until recently, these powerful nations have been able to easily roll over their debts each year because lenders have been willing to shower them with gigantic quantities of very cheap money.
But in 2011 bond yields for many European nations really started to soar. When the cost of borrowing goes up, that puts a lot more pressure on the finances of nations that are already very deep in debt.
According to Bloomberg, it is being projected that borrowing costs for G-7 nations will rise very rapidly in 2012 as well….
Borrowing costs for G-7 nations will rise as much as 39 percent from 2011, based on forecasts of 10-year government bond yields by economists and strategists surveyed by Bloomberg in separate surveys.
Rising borrowing costs are a major reason why Italy is on the verge of financial collapse right now.
During 2012, Italy must refinance approximately $428 billion of government debt. If the rest of the world is not willing to buy that much Italian debt at current interest rates, that it going to create a major crisis.
Of course the European Central Bank could intervene even more than it has been, but there is a limit to what the ECB can do under current agreements.
The truth is that the European Central Bank has already spent over 274 billion dollars buying up the government bonds of troubled European nations such as Greece, Italy, Portugal and Ireland in an attempt to control the rise of bond yields.
But even with such unprecedented intervention, bond yields have still risen substantially.
Germany and other northern European nations are adamantly against the ECB directly funding the deficit spending of profligate southern European nations. Germany has insisted that troubled nations such as Greece and Italy deal with their debt problems by implementing brutal austerity programs.
But all of this austerity will almost certainly bring on a major recession. The following analysis comes from a recent article by Ambrose Evans-Pritchard….
The European Central Bank has guaranteed trouble by letting M3 money contract. Fiscal tightening into the downward slide will make matters worse. A credit crunch as banks shrink loan books by €1 trillion to meet capital ratios will do the rest. All policy levers are set on deep recession, and deep recession is what Europe will get.
And a deep recession will only make the debt problems of European nations even worse.
But Europe is not the only one in trouble.
Japan is also on the verge of complete and total financial collapse. The government of Japan spends more than twice as much as it brings in, and public debt has risen to 237 percent of GDP.
Up until now, the Japanese government has gotten away with this because the Japanese people are great savers and they have been willing to lend huge mountains of money to the Japanese government for very little return.
But there are signs that the situation in changing, and if interest rates on Japanese debt go up even just a few percentage points it is going to be a total nightmare for Japan.
There is simply way too much debt all over the world. Greece thought that they would be able to borrow cheap money forever, but now look at them. The yield on 2 year Greek bonds is now up to 134%.
All of these nations that are gobbling up cheap money now should take note that this supply of cheap money will not last forever.
Unfortunately, our world has gotten completely and totally addicted to debt. The following comes from a recent article by John Mauldin….
Total debt-to-GDP levels in the 18 core countries of the Organisation for Economic Co-operation and Development (OECD) rose from 160 percent in 1980 to 321 percent in 2010. Disaggregated and adjusted for inflation, these numbers mean that the debt of nonfinancial corporations increased by 300 percent, the debt of governments increased by 425 percent, and the debt of private households increased by 600 percent.
Of course the biggest debt of all is the national debt of the United States. As ofthis moment, the U.S. national debt is $15,222,940,045,451.09, and the debt recently surpassed the 100 percent of GDP mark.
So why haven’t things collapsed already?
Well, it is because the U.S. can still borrow massive amounts of cheap money.
Right now, the average interest rate on U.S. debt is approximately 2.18 percent.
That is very, very low and it will not last forever. When it rises we will be in a heap of trouble.
And in future years our debt is projected to rise to absolutely insane levels. The following chart comes from a GAO report that was just released. To be honest, the projections that the GAO report uses are so optimistic that they are beyond ridiculous. But even using those ridiculously rosy financial estimates, U.S. government debt is still projected to skyrocket to absolutely unprecedented heights in future years….
Once again, please keep in mind that the GAO chart above is based on projections that are unbelievably optimistic.
We are in a massive amount of trouble my friends.
At this point, we owe the Chinese nearly a trillion dollars. They are running out of things to do with all the money they have gotten from us. Recently it came out that the Chinese actually want to buy Yahoo.
We are mortgaging our future, and for what?
We have been so incredibly foolish.
So what is the solution?
How will our “leaders” solve our debt problems?
Well, world famous investor Kyle Bass recently said that a senior member of the Obama administration told him that “we are just going to kill the dollar“.
That doesn’t sound good.
So are we really going to print our way out of trouble?
Or will our financial system just simply collapse under the weight of so much debt at some point?
If our system does collapse, people are going to want something new. Unfortunately, a growing number of Americans seem to think that socialism is the answer. According to a new Pew Research Center poll, Americans between the ages of 18 and 29 actually have a more favorable view of socialism than they do of capitalism right now.
That is very sad. The truth is that America has already been marching towards socialism for many decades. The federal government just keeps taking more of our money and just keeps spending more of our money. The following chart below shows how federal receipts have risen as a percentage of GDP over the last 60 years….
If there is a massive global financial collapse, another solution that will inevitably be put forward is for the world to adopt a global currency.
The seeds for this have been planted for many, many years. In dozens of books, television shows and movies about the future a “global currency” plays a major role.
Sadly, more than 40 percent of all Americans believe that we will see a global currency by the year 2050. The following comes from a recent article in Wired Magazine….
But does this mean we don’t see a global currency in our future? For many, the answer is no. A recent Pew Research poll reveals that 41 percent of Americans expect it by 2050. Maybe the idea has been planted in our heads by leftist utopians and science fiction authors: a system of “credits” is used in everything from Star Wars, Star Trek, and Babylon 5 to the Foundation book series. Yet the idea has also been touted by economics titans like John Maynard Keynes.
Let us hope that the United States never is part of a global currency, because that would be the end of our national sovereignty.
But one thing is for sure – the world will never be the same after this debt crisis plays out.
Enjoy the prosperity of today while you can, because there is no way that it can last.
A massive financial collapse is coming, and it is going to shake the entire globe.
Sadly, most people simply do not care about the debt bomb that is hanging over the nations of the world, and the coming crisis is going to devastate their lives without any warning.
Source: The American Dream