Here we go again, European edition!

My wife Kim and I text a lot. It’s just easier to do these days when you’re running around, busting your tail at work, chasing after the kids, or what have you.

Every once in a while, she or I share not-so-shocking news about friends who are doing the same things they always do again, or about relatives who are back to their old crazy ways. Our standard, funny response — “Here’s my surprised face :l”

I thought of those exchanges this week as I watched Europe begin to implode yet again. All the hope and all the hype from August and September — spurred on by talk that Europe had finally “solved” its problems — is now fading away, just as I suspected it would. And that has potentially serious implications for you as an investor!

Why Europe Is Starting to
Go Down the Tubes Again

I’ve been following the European sovereign debt crisis for more than two years now. I’ve heard about and read about countless “fixes” to the problems during that time. But after carefully analyzing all the programs, I’ve come to the same conclusion every time …

None of the so-called solutions actually solve the underlying problem! They’re all designed to paper over the trouble for a while and make everyone feel better for a few months. And they only make the ultimate day of reckoning worse by pushing it out further.

The bottom line is that too many European countries owe too much money to too many creditors. And the only way to free them from those burdens is to just let them default! If that results in the failure of some large European banks, or a short-term, sharp drop in the markets, so be it! That’s life!

But the monetary policymakers at the European Central Bank don’t want to face the music. They think that by printing money and buying sovereign bonds to give the European politicians breathing room, they’re actually doing good. The problem is that when they do, the politicians just take that breathing room and squander it!

Case in point: As soon as the ECB pledged to buy the bonds of troubled countries like Italy and Spain, it caused the yields on those countries’ bonds to drop. That took the market pressure off the politicians.

So what did they do?

They stopped talking about reforms that would improve their debt and deficit situation! They also backpedaled over accepting money from Europe’s bailout funds because the money would come with conditions that would restrict their ability to continue to borrow and spend recklessly.

As a result, what are we now seeing again?

More pushback from Germany, Finland, and other countries that actually do have money and don’t want to keep writing blank checks to their broke neighbors? Check.

More rioting in the streets against austerity? Check, this time in both Greece AND Spain.

More bad underlying economic news, confirming that the average European citizen is suffering … even as the wealthy, well-connected bankers keep getting billions in aid to prevent them from taking their medicine? Check.

More oh-so-surprising news that Greece’s deficit is actually going to be much worse than expected, requiring billions and billions of euros in additional aid? Check.

Eerie Parallels between Europe and U.S. a
Foreboding Sign for Our Future?

Here in the U.S., much of the same sorry process is playing out. Our fiscal policymakers in Congress — and the President — know that a massive fiscal cliff is looming on January 1, 2013. They know that we keep running annual deficits of a trillion dollars or more, year in and year out, and that our total debt load has now eclipsed $16 trillion.

The ECB’s and Fed’s continuous money-pumping is just delaying the day of reckoning.

But they’re doing nothing to head these crises off at the pass! Why? Because just like the ECB, the Federal Reserve is acting like a junkie’s enabler! It’s providing more and more monetary drugs in the form of QE-Eternity. That, in turn, is preventing the kind of interest rate or stock market shocks we NEED to force the politicians to actually do their jobs.

How long can this increasingly unstable situation persist? Can we really keep avoiding a day of reckoning forever, especially with the economic and earnings situation continuing to deteriorate week in and week out? Those are the questions I’ve been attempting to answer for you for a while now.

I have argued that this state of affairs is simply untenable … and now my view may be gaining traction. I say that because …

* The broad market suffered its worst one-day hammering in two months this Tuesday.

* Riskier stocks in sectors like technology and banking are starting to get pounded, while safe haven names like utilities have begun to rally again.

* We have now given up ALL the gains that resulted from the Fed’s pledge to print money until the Earth gets swallowed up by the sun … and then some.

* The euro has already shed a couple of cents against the dollar in the past several days.

* Spanish and Italian bond yields have reversed higher once again, with the Spanish 10-year breaching 6 percent.

These are all cracks in the market’s armor — and they could point to even worse turmoil ahead. So if you haven’t yet heeded my advice to take some profits off the table, and add some downside hedges in the form of put options or inverse ETFs, please don’t wait any longer! You may not have much time left.

Until next time,

Mike

P.S. I’ve just put the finishing touches on my emergency guide, America’s Final Judgment Day: Protect Yourself and Profit. Inside, I give you very specific instructions on the steps you must take to protect your income, your savings, your investments and to get your financial house in order.

Click here to learn how to get your free copy, while there is still time!