In 2008, the failure of Lehman Brothers nearly collapsed the global financial system. To avert collapse, it required unprecedented global government bailouts, backstops and policy responses.
These efforts bought some time — nearly two and a half years to date. But time hasn’t healed the wounds. In fact, the government responses have done nothing to avoid the ultimate fallout, rather exacerbating it by transferring private debt into public debt, and building more and more debt in the process.
That’s why the global economy isn’t recovering despite the many calls from Wall Street. It’s only catching a breath, before the next wave hits.
The wave that promises to be …
The Main Event
As I laid out on April 16 here in Money and Markets, despite all of the fanfare surrounding fiscal and monetary policy in the U.S., the next wave has all along been emanating from Europe.
And in the past week or so, we’ve finally seen the appropriate fear and a growing acceptance of what’s likely to be the “main event.” That is, sovereign debt defaults in Europe.
Harvard Professor Kenneth Rogoff’s study on historical sovereign debt crises finds that not only do sovereign debt defaults tend to follow financial crises, but they tend to be widespread.
It’s the combination and systemic nature of sovereign debt and the global banking system that make the prospects of rolling defaults far more dangerous than what was experienced in the 2008 failure of Lehman Brothers.
Consider this: Even after the problems in the PIGS countries (Portugal, Ireland, Greece and Spain) were exposed early last year, European banks have done little to pare back the sovereign debt they hold of these countries.
The most recent report from the Bank for International Settlements shows total exposure of euro-zone banks still hovers around $2 trillion. With that in mind, Standard & Poor’s just said this past week that Greece would have to trim their debt by at least 50 percent for it to become sustainable — that would mean a 50 percent haircut for debt holders!
While it’s true that European banks are on the hook for the lion’s share of the risk from a default of a country in Europe, the Lehman crisis made it abundantly clear that a major bank failure has acute global consequences.
Perhaps that’s why European Central Bank policymaker Jürgen Stark said that a debt restructuring in the euro zone would result in a banking crisis that would be worse than Lehman.
Warning Signs Flashing
As such, the following sequence of events that have occurred over the past two weeks should give fair warning for what likely lies ahead …
It started with a breakdown in the global commodities run — namely the contra-dollar assets. With the contra-dollar bubble pricked, cued by the purge of speculators from the silver market, the attention of global market participants then turned away from the U.S. and back to Europe.
Then followed an article from a German online magazine suggesting that Greece, fed up with the austerity forced upon it by its European neighbors, was contemplating pulling out of the euro, re-adopting its own currency and devaluing its way out of debt.
Showing just how slippery the slope is in a sovereign debt crisis, the next day a piece ran in The Irish Times quoting a local economist making the case that an Irish departure from the euro was the only way for national survival.
With those threats on the table, all of a sudden European officials are considering the only option left to possibly delay the impact from the sovereign debt crisis … relaxing the conditions on their rescue loans. This is where it gets even more dangerous.
Such a move would expose who has the real position of strength in the euro-zone crisis: Not the strong (i.e. Germany). But the weak (the PIGS)!
As Keynes said (my paraphrase), “If you owe the bank $1,000, you have a problem. If you own the bank $100 million, the bank has a problem.”
Given the exposure of German banks to PIGS debt, the country made a decision last June to go “all-in” to keep the euro zone together by offering Greece rescue funds. It’s clear though, neither Germany nor the rest of Europe have a plan for solving the problem, other than denying the ultimate outcome and trying desperately to keep it all going.
Moreover, they’re downplaying a critical point …
The Problems in the Euro Zone Are All Rooted
in Their Single Currency: The Euro!
The euro-member countries are in trouble for all of the reasons Milton Friedman, one of the most influential economists of the 20th century, cited prior to that currency’s inception over twelve years ago.
He said:
- A “one size fits all” monetary policy doesn’t give the member countries the flexibility needed to stimulate their economies.
- A fractured fiscal policy forced to adhere to rigid EU rules doesn’t enable member governments to navigate their country-specific problems, such as deficit spending and public works projects.
- Nationalism will emerge. Healthier countries will not see fit to spend their hard earned money to bail out their less responsible neighbors.
- A common currency can act as handcuffs in perilous times. Exchange rates can be used as a tool to revalue debt and improve competitiveness of one’s economy.
Friedman predicted the euro would succumb to these flaws and fail within 10 years. It seems he might not have been too far off.
What does it all mean? It’s time to play defense, not offense when it comes to your investments.
Regards,
Bryan
{ 42 comments }
Excellent article-rough seas ahead
Great article… I would like to add to the complexity though that the problem of states like California is a bigger problem to the US than Greece, Ireland and Portugal are to Europe.
Maybe California should bail out of the USD, and get their own currency and deflate their debt. A crazy thought but the parallel is obvious…
California is a black hole just like New York and all the handout spots (big cities) that are trying to help the poor. They do it by ripping off the middle class. They are afraid to challege the rich. They created a fudal system where 80% of the money manages to go to the rich. Just like fudal Europe. Only technology makes it appear like we are rich. 80% of the world is not rich. no different here in the US. Dont be fooled. No one you know is rich evn the ones that appear to be rich. Only the mega moguls are rich. Millionaire means nothing. The dollar has been devalued 95% since the depression. That means millinonaires need to remeasured to billionaires. The benefits of technology have been hoarded by the super rich. We live in a fudal world.
I’m not sure why you say the global economy isn’t recovering. Numerous countries such as China, India, Brazil and Indonesia are experiencing tremendous growth. Even the U.S. is growing by about 2.6%. Sure there are pockets of problems but the ultimate outcome remains to be seen.
What economy wouldn’t grow?? when you throw 3 trillion dollars at it?By the way the unemployment numbers. debt numbers etc. are all off tremendously……
Some people just don’t get it. Read the story of Noah’s ark.
These people did not heed the warning and they paid for it with their LIFE.
KING RALPH On the surface things seem to be OK but there is a lot of pessimism in the financial community that we are building to a crisis situation. The problem is the stratospheric levels of debt and the lack of any real solutions to deal with these debts. Once the dam breaks all hell will break loose. Incidentally, aren’t we just 2 days before the US hits the debt ceiling? And Congress is STILL so dysfunctional it hasn’t raised the debt ceiling. Talk about imbeciles running the country. Its going to be interesting to see who collapses first. Europe or America.
So do you short the Euro? Pile back into gold? Go long the USD? How best to play these developments?
Excellent article. Growth is one thing, sustainable growth is another. Export economies need healthy import economies, pure and simple.
Great article. Can’t get this kind of thinking anywhere else.
If rolling defaults occur in Europe, I wonder how it all plays out. I’m not worried about the U.S. defaulting; we can just create money to pay our debts with an accounting entry as Mr. BernanQE tells us. But what institutions and hedge funds collapse as a result of other sovereign defaults? What does this do to our economy?
Could all these defaults be the black swan catastrophe that ruins confidence in the dollar and leads to hyperinflation (which is the true nightmare scenario for the dollar)? Or does the dollar soar to new heights? So much of the value of the dollar depends on the status of the Euro and European economies. What might politicians do to save their currencies/economies? Maybe Don BernanQE will save Europe, too?
Bryan is not saying when rolling defaults would happen. We shouldn’t underestimate the ability of politicians to kick the can down the road, right?
Too many variables, but in the long run,holding some precious metals bought at the bottom of the current slide (if you can call the bottom) seems like a good idea. Trouble is, the euro and hard assets are correlated right now. Why aren’t more investors going for precious metals right now for protection? Why just the dollar?
With all these uncertainties, Bryan’s recommendation of defensiveness is sound. Maybe even diversified, flexible defensiveness.
This game is too hard. Oh well, you can’t take it with you, anyway.
your views on usa printing way out is why we are in the mess were in.Its not a usa or eoro thing its a developed vs emerging market tidal wave of chande and te old western rules are not gonna be followed anymore.The demograpics and entitlements support a western developed world readjustment and a reluctant handoff to the creditors and the better demographic profile for the forseeable future.
“creat[ing] money to pay our debts” is default, and probably the only way out for the I.O.U.S.A.
Repayment of loans with inflated currency is still a default.
We can print our way out of the mess. If the US government issues non-debt based currency to pay our debts and End the Fed. If we keep borrowing more money into existance then we’ll be in real trouble.
There aren’t going to be any “rolling sovereign defaults”. Perhaps one PIG will default, and the banking crisis that results will force the EU to hold an emergency conclave, and either write a new EU Constitution to be ratified the next morning, or simply follow the Roman model and appoint a Dictator to handle the crisis. Either way, all of the EU will become a single country, and they will print and borrow as necessary to prevent their banks from collapsing.
The real problem is political. Once the EU is fully unified, will a State try to secede from the EU? If yes, what flashpoint will play the role of Ft. Sumter?
Try something I was taught long ago. “If you don’t have the money for (fill the spaces), then , SAVE the money until you have the cost of the item, program, dream, political enticements, cushy lifestyle, medical insurance, building a home, educating yourself or children, etc., etc., etc.” Government has a deathly habit. It’s named the “NOW” disease. NOW, NOW, NOW!!! CREDIT is not a prescription for anything. My father gave me a short training session. He said,” If you want to spend for something, simply check the contents of your wallet (or your bank account). If you don’t have the price, then you can’t afford it!!”
Many individuals (and Countries) have never received the wisdom lesson.
I sleep quickly and deeply. I was taught not to ever create a burden to others. Who said, “Poverty is supposed to be uncomfortable” ? (I know who said that. I just wanted you to do the research and find out for yourself.)
Why do people, countries, organizations make it SO complicated?????
Hiltler tried this ploy in ’37 and look what’s happened over the past 83 years.
Thank GOD, I’m in my eighties and won’t have to watch the probable nuclear holocaust.
When the Socialist/democrats/lieberals were promoting the concept of the Euro back in the day . . . it appears no one had the foresight to ask the question “what will happen if a member country fails”? Another example of lieberal/socialists Short Sighted Ambitions . . . . the masses are once more subjected to “Unintended Consequences” of leftist nonsense!!
Bryan.. Friedman was not alone in his forecast… As a long time currency trader, you know we must “watch the world” to trade well.
Here is my two cents on the EUR…
I have professed the since its inception both the virtual trial trading phase, and the actual physical implementation, that the EUR currency, while conceptually convenient, was inconsistent with the vast diversity among the member Countries.
Given that premise, my opinion has been all the while; that the EUR would likely not ever fully realize all the grandiose mandates under which it was quite forcefully conceptualized.
Well here it is coming home to roost… None of the members even remotely maintained the edicts of membership from the outset. The most compliant was Germany until the recent bailouts… Now the world cannot seem to see what went wrong.
Additionally, the EUR composition took one strong currency (Deutschmark) and added several inferior currencies to make a basket… Then had the nerve to set the opening price at better than twice the single strongest member… Little wonder the EUR is faltering… As goes the legend of the EUR, so will follow the exodus of members… Most likely the members (as Greece has) will realize the benefits of managing their own economy with printing presses, and local governance, ultimately realizing that doing so, far outweighs the disadvantage of visiting a neighbor Country and having to convert to that Country’s local currency. Another huge advantage soon to be realized will be the prospect of not having yet another oversight agency endlessly barking in your ear. Goodness what may become of the ridiculous VAT?
David, ALL of WORLD HISTORY has been distorted. Most students HATES history, because they don’t believe in it’s importance. IT’S BORING and NOT NECESSARY to get a good paying job. ALL WORLD HISTORY PAST AND PRESENT is found only in the BIBLE, but NO ONE FINDS IT NECESSARY TO READ IT. FIRST, when they start reading it, they stop in believing it can’t be understood. YET, everyone reads all books for the very FIRST time and don’t really understand it. Books become understood when it is read in it’s entirety and not before. ALL SUCCESSFUL PEOPLE READ BOOKS FROM BEGINNING TO END and many time RE-READ CHAPTERS THAT IS VAGUE. ALL SUCCESSFUL PEOPLE ALSO READ MANY RELATED BOOKS WITH REGARDS TO THE TOPICS OF CONCERNS. THEY BECOME MILLIONAIRES AND BILLIONAIRES. WHENEVER A PERSON READS THE BIBLE JUST FOR HEAD KNOWLEDGE, GOD CONFUSED THEIR MIND. GOD KNOWS EVERYONES THOUGHTS AND HE PURPOSELY HIDES HIS KNOWLEDGE FROM THE WICKED. NO ONE CAN UNDERSTAND THE BIBLE UNLESS GOD LETS THEM, BECAUSE HE KNOWS WHO WILL USE IT FOR HIS PURPOSE AND NOT FOR THEIR PURPOSE AS MANY FALSE CHURCHES DO. THE WORLD FOLLOWS THE FALSE CHURCHES AND CAUSE THE WHOLE WORLD TO BE IN CHAOS AND IT WILL END: EXCEPT THOSE DAYS ARE LIMITED NO FLESH SHALL BE SAVED ALIVE EXCEPT FOR THE ELECT (THOSE WHOM GOD HAS CHOSEN). ANYONE WHO READS THE BIBLE FOR THE PURPOSE OF THE BIBLE ARE THE ELECT AND NO ONE ELSE: NO EXCEPTION. SATAN IS DECEIVING ALL WHO REFUSES TO READ THE BIBLE AND OBEY WHAT IT SAYS. WHICH ONE ARE YOU? THINK OF ALL THE TIME YOU SPENT STUDYING WAYS TO MAKE MONEY AND COMPARE THAT AMOUNT OF TIME YOU HAVE NOT SPENT TO READ THE WHOLE BIBLE SO GOD MIGHT DECIDE TO CALL YOU. “MANY ARE CALLED BUT (“ONLY”) FEW ARE CHOSEN! WHY???? YOU ARE EITHER FOR GOD OR YOU ARE AGAINST GOD. THERE IS NO IN BETWEEN. EITHER LIVE FOREVER (GENESIS 3:22) OR BE PUT OUT OF EXISTENCE FOREVER. GOD WISHED THAT NO ONE PERISH, BUT THERE ARE THOSE WHO REFUSE TO OBEY JESUS: “MAN SHALL NOT LIVE BY BREAD ALONE, BUT BY EVERY, (EVERY) WORD OF GOD. (MATTHEW 4:4, LUKE 4:4) HOW CAN ANYONE LIVE (DO WHAT IT SAYS) BY EVERY WORD OF GOD UNLESS HE READ IT. A MECHANIC CANNOT REBUILD AN ENGINE UNLESS HE READ EVERYTHING THERE IS TO KNOW ABOUT IT AND HE CAN’T DO IT WITHOUT THE PROPER TOOLS. I HOPE YOU UNDERSTAND THIS. YOU MIGHT BE ABLE TO HELP A WHOLE LOT OF PEOPLE IF YOU EVER GET STARTED. DON’T YOU HAVE AT LEAST ONE HOUR A DAY TO DEVOTE TO READING AND STUDYING THE BIBLE UNTIL YOU HAVE READ TO THE END? TIME IS SHORT. START NOW AND YOU MIGHT BE ABLE TO FINISH BEFORE IT IS TOO LATE. EUROPE WILL RISE AS THE WORLD POWER AND WILL DOMINATE. NO ONE WILL BE ABLE TO STOP THEM.
Hi Ronald
I know you mean well but to offer you a different perspective on history and genetic heritage, please Google and read ‘Return of the Light Prince’. Don’t be fooled by the title.
Brian, glad to see you referencing Rogoff’s book. It’s not an easy read, but the conclusions are inescapable. A few things you didn’t touch on in much detail, and I’d like your opinion on:
1) Will the bank crisis in Europe spill over to the U.S. Are our too-big-to-fail banks exposed materially to euro-defaults?
2) What exactly do you consider “playing defense”? Will this mean a short-term rally for the dollar as it become the least ugly in the bunch … or perhaps this bodes well for the price of gold?
Regards
As a follow up: The credit default swap business is effectively still unregulated and the exposure is astronomical if even one counter-party fails (which is is why AIG was bailed out and Lehman was not). Do you think a bank crisis in Europe will bring the CDS house-of-cards down?
Hi David,
I believe that AIG was bailed out so it could pay off Goldman Sachs 100 cents on the dollar. As far as Lehman goes they were just the patsy.
::I believe that AIG was bailed out so it could pay off Goldman Sachs 100 cents on the dollar. As far as Lehman goes they were just the patsy.::
Tom,
Yes, that is why AIG was bailed out. Lloyd Blankfine (Goldman Sachs) met with the Fed a day or two before the announced bailout of AIG. I guess Lloyd wanted to make sure his CDS’s were still worth 100%.
I heard that the German and French banks that lent Greece the bailout money also have CDS’s to hedge their bet should Greece default. It was rumored that Wall St. is on the hook for the CDS’s so they could owe Germany & France billions of Euros. If this is true, if Greece defaults, it will take Wall Street with it. (Here’s hoping!)
Brent
Substitute “States” for Nationalism in Freemen’s point three and “citizens”for countries in the same point and one might get a sneek preview of what is ahead of us in the USA! It is one thing the give to one in need and quite another to becomeing a full time “needer” that sees no purpose in working or making an effort.It my view it is even worse to pander to the “professional Needers” for their vote.In doing so one inpowers the very segment of society that does not produce and makes them imbolden.
QE I & II. Using debt to pay off debt. I just can’t get my mind around this one. It seems to me it’s like taking poison to cure taking poison. Am I wrong?
Andrew P has it about right. There is no mechanism for leaving the Euro. All the member countries of course had their own currencies but a moment’s thought will convince you that a country leaving whose “new” currency might be expected to lose value will cause an immediate run on that country’s banks as depositors withdraw their cash in Euros prior to the leaving date. A mechanism could have been written at the time of joining to fix the return exchange rate, but it was not.
As an exercise only consider the case of a country leaving the Euro whose currency might be expected to strengthen. Euros flood into its bank accounts in anticpation of a conversion which adds value.
Therefore the most likely solution is that all current sovereign debt in Euros will have to valued pari passu, irrespective of the issuer and guaranteed by the ECB. But future sovereign issues will not be so guaranteed. Unless the ECB approves them which it will only do for the stronger EU nations.
This means that the Pigs will have to issue sovereign debt in other currencies eg dollars or Sterling not Euros. This is no problem – the Italian government has issued treasury notes in Sterling for some years. It finds a price based on the markets view of Sterling relative to other currencies and the Italian’s record on default.
In WWII, nimble footed Europeans converted their currency into gold, silver and diamonds. They could then take this form of currency anywhere else and do business. Or eat maybe.
How about putting a piece (certainly not all) of your investment capitol into purchasing debt of others? Of course you would have to buy at a DEEP discount as much of it will be worth less and worthless. Just ask S&P, etc as they downgrade bond issues. There’s a lot of business debt that can be bought at a discount. Besides the PIGS countries, there are a lot of “piglets” available for sale.
The messenger and the message. In every case you shouldn’t consider one without considering the other.
It seems the TV and many others advertising for precious metals brokers want you to believe in a coming high inflation. It seems just in time to “protect yourself” at the highs so those creating the bubbles can have someone to sell to as they get out. If Soros and Slim(worlds richest man) have not only exited Silver but have shorted it. Does that tell you anything?
For as long as I’ve been reading, Bryan has an unconfused consistent clear view of reality. Warnings are warnings, to keep on your toes and to be ready to exit “investments”(which in fact are speculations if you are hoping to sell at a higher price down the road, like almost all trades short or long term are) which are exposed to unwarranted levels of risk. i.e. PIGS debt and repercussions from sovereign debt default. Bryan has also commented on how the information leaders and authorities have put out have been exactly false, saying “we don’t have a problem” then the next day or so they accept big bailouts. Do you think company CEOs are any different? Banks have been failing all along here. Just not in the news. When another big one goes down is that going to make folks to have more confidence to run out to buy more stocks? Hardly. Even though “the supposed “recovery” propaganda is designed to goad you into buying stocks at bubble prices while the big boys who created the bubble using YOUR future tax obligations to create that bubble with. Bryan is trying to warn you in polite terms. Me, I can call Goldman Sachs the weasels and crooks that they are along with Soros and all the rest of the manipulators. You have to pull your head out of the TV or where ever else you have it stuck and do some thinking about what is real, what is true, what can we learn from history. …Instead of whining, “its too hard”. No one has a crystal ball into the future, especially exact timing(unless you are the ones manipulating a market) but to be forewarned is to be forearmed. Give the weasels a forearm instead of becoming a victim to them! Look at a Chart, make a case for where you are getting out. If you use a trendline, you can always get back in using another one if you made a mistake. If you can’t do that, you shouldn’t be in, in the first place. Or you can watch your speculations the financial media likes to refer to as investments, see-saw their way down like those last time around …just like the bubble makers want you to be holding their bag of doggie do.
Regardless of who turns out to be the accurate prognosticator or missed the mark, it doesn’t matter if you pay attention to your method of entry and exit which needs to be more than what you hear or read unless somehow that works well for you. Unlikely in this day and age with so many conflicting opinions.
As always, nebulosity reigns. Ambiguity is king. Conjecture takes on the guise of absolutes. The common man is left scratching his head in wonderment. But here is the bottom line:
A. Astute investigators have long since reached the conclusion that all markets, all booms, all busts, all recessions, and all depressions are not accidental, but are coordinated pre-meditated events, planned and structured to:
1. Reward the elite who engineer the manipulations
2. Defraud the common people
B. The same sage investigators have come to realize that this elite is composed of:
1. Persons of high status, great wealth, and historical lineage and are all interconnected in some way
2. That these elite are “internationalists” owing loyalty to no one nation, but only to themselves.
C. The enlightened ones also know that:
1. This elite acts always and only in its own self-interest
2. Despite outward pretenses, it cares nothing for the common persons of the world
D. The knowing ones also relate that:
1. The elite has a master plan to continue the degradation of America for broader purposes
2. Those “broader purposes” are being carried on unbeknownst to the common person
This “elite” are like rats, gnawing at a nation from within, growing fat on its substance and delicacies, but then, when the gormandizing is through and there is little left to gain from the sinking ship, now reduced to a bare hull, the rats jump off and head for the next victim (nation).
Read history carefully—how nations rose and fell—and see who always profited despite any turns in fortune for the masses. I have given you the broad outline.
If you read between the lines and have any sense of intuition you will be able to prepare yourselves accordingly. Remember this: All paper instruments are exactly that–paper!
ABE You are giving too much credit to the “elites”. Your analysis suggests a grand conspiracy. The reality is quite different. Of course, there are always going to be “elites” that are better off. But the conspiracy model is not an accurate description of what is going on. A better description is a chaotic room full of noisy fighting kindergarden children. None of the mess that Bryan describes can be planned. If you look at the dysfunctional state of Congress and Europe, you’ll realise nobody is in charge of this chaotic mess. In fact, that’s precisely the problem.
ABE, I wholeheartedly agree with you. Witness the wonderfully dysfunctional, fully regulated, totally uniinsured golden calf brainchild of your “elites”, the 401K. Now picture a whole room with those gray-haired pipe-smoking elitists pounding their fists on the table when someone came up with the perfect idea to get the average blue-collar worker’s money into Wall Street. They just might’ve all had a big bang at the sheer notion. Conspiracy theory? I think not. Brilliant? I think so.
For the last two years, if you did the opposite of these W pundits then you did well. Meaning that as W maintains its bearish outlook, the market keeps going up. W has not been spot on in the past two years that I can see. I even wonder if W relishes in the financial demise of this great country.
I doubt W will even let my msg post.
Good article Bryan, this all works to the advantage of the US,at least short to intermediate term. You see, the US is in the best position (the least bad of all the geos) to come out of this “Great Recession” compared to rest of the world. China has an inflation and real estate bubble that will burst, Japan is out of commission with a flat economy for 22 years after its stock and real estate crash and now the earthquake, and Europe is worse off than US with respect to the debt problem and the fact that the Euro is NOT the worlds reserve currency. So, what is happening going to happen is just what I thought would happen: we are now going to see a deflationary “risk off” trade with capital coming out of the equity and commodity markets and flowing into “perceived quality” of the US dollar and treasuries, helping to keep interest rates low and take some pressure off the Fed on inflation and starting up QE3 and allowing the necessary time to come out of the recession as the private sector continues to heal while the public sector is still going thru austerity measures. The US will be the least bad place to invest in this timeframe…I have been saying this for 18 months, no US bond market crash, at least not in short to intermediate term.
your dreaming as the bric countries are your leaders nows—–US bonds and dollar orover inflated paper—-hard assest is better then US dollar
The sooner you American start to live with in your means the sooner things will get better in your country
I like your thinking, even though no one knows how the future will unfold. Politics, policies and politicians will not matter when the people will rule. Greece will be the starting revolution, and others will follow. It is the same thing that is happening in the middle east. People dont care what their currency is, they care that they got enough to eat. I also believe another crisis of huge proportions will start with Europe, and the world crisis will follow…and this time there is not much to do but let it run it course, pick up the broken pieces and start again. Within all this crisis, the dollar may still be the only survivor for the next few years. After all, we dont yet have a federal tax like Europe does with its 15% VAT. Easy fix for our government in time of emergency…sure a federal tax would sink the economy, but the economy wont be the focused anymore, survival will. China depends on USA funding of their jobs, we dont consume, China does not grow. I dont know anything. Just an opinion.
It’s amazing how everyone has everything figured out.The euro collasping,the dollar is collasping,the stock market is collapsing,gold going sky high,silver going sky high,oil going sky high.Then,the euro goes sky high,now collapsing.The dollar collapsing,now going sky high.Oil sky high,now collapsing.Gold,silver going sky high,now collapsing.The stock market goes sky high,now collasping.Pay attention to the markets yourself,all markets are day trading markets.News is affecting markets by the minute.No one has anything figured out.What is for certain,when you think you have everything figured out,the opposite happens,that is the truth.
Sign me up yesterday!!!
Once again I am impressed with your cogent and incisive analysis. Excellent piece Bryan.
The problem isn’t the Euro, its that they have adopted a debt based currency like every other nation. It is stable as long as debt expands geometrically, but goes unstable when the growth slows and even the interest becomes unpayable. One of the little advertised joys of fractional reserve banking – i.e. loaning money out of thin air.
As a public service, I highly recommend everyone watch two videos. They will truly change your paradigm about the way the world, economics, and politics work.
Money as Debt 2 Promises Unleashed: http://www.youtube.com/watch?v=_doYllBk5No
The Money Masters: http://www.youtube.com/watch?v=lXb-LrVkuwM
I usually appreciate the input of varied experiences reflected in this blog.
However, from time to time I must counter-comment some right wing idealog’s ‘perception’
of the world. The ‘left coast’s’ recent comment has pushed me over the threshold.
The financial illness our once great country is experiencing is due to waging TWO UNFUNDED Wars
along with the ‘make em all happy’ financial programs delivered to the masses by Greenspan et al. for purely short lived political gain. This was all done PRIOR to the current administration takeover ….
The wall street ‘bailout’ was done by HANK PAULSON under the bush administration, during the bush administration ! So, take that socialism BS elsewhere, where some members of the Idiot Nation will greater appreciate it….