financial system that is based on debt is doomed to fail. Today, we are
living in the greatest debt bubble that the world has ever seen, and if all of
a sudden people could not use credit to buy things our economy would
immediately ground to a halt. Unfortunately, no debt bubble can last
forever. When this current debt bubble finally bursts, faith in the
financial system is going to disappear, credit is going to freeze up and there
is going to be a massive wave of bank failures. Right now,
Unfortunately, most in the mainstream
media are treating what is happening in
Thankfully, there are at least a few
reporters out there that are realizing the gravity of the situation. The
following is how one reporter from the New York Times recently described
what life is like in
Can you imagine?
As I have written about previously, the overall rate of unemployment in
Deleveraging can be an extremely painful process. Greece has been forced to try to reduce the size of its budget deficit, but every time it cuts government spending that causes economic activity (and thus government revenues) to slow down as well.
Now the EU and the IMF are demanding
that even more very painful austerity measures be implemented in
The EU and the IMF are demanding that
The EU and the IMF are demanding that wages for government workers be cut by another 20 percent.
The EU and the IMF are demanding that the minimum wage be slashed by more than 20 percent.
The EU and the IMF are also demanding significant reductions in unemployment benefits and pension benefits.
Of course all of those cuts are going
to make the short-term economic conditions in
The rioting, looting and burning of buildings that we are witnessing right now in Greece is likely to continue for quite some time as exasperated citizens attempt to express their frustrations to politicians that simply do not seem to care.
According to the National
Confederation of Greek Commerce, recent rioting resulted in damage to 153 businesses in
You can view some stunning footage of
the current rioting in
Despite all of the austerity measures
that have already been implemented, the truth is that
There is a very good chance that the new austerity agreement that the Greek parliament just approved will never be implemented. There are new elections scheduled for April and the current party in power is polling in the single digits.
The new Greek government is likely to look much different from the current one, and nobody knows for sure if the new government will follow through on any of the promises being made by the current government.
In addition, the German parliament
must approve this new deal with
So there are all kinds of things that could go wrong with the "deals" that are currently being discussed. The truth is that a Greek default in the coming months seems to become more likely by the day.
Some in the financial world almost seem eager for a Greek default. The following is what Jon Moulton, the chairman of Better Capital, recently told CNBC....
"If I was Greek, I wouldn’t be going for these measures, I’d be going for default and getting it over with. Would you like two to three years of pain or 20?"
But a disorderly Greek default would not be a pleasant thing for the global economy at all. A recent article in the Guardian detailed what some of the consequences of a Greek default and exit from the eurozone might be....
But default and "re-drachmatisation" would be a costly and chaotic process. In the long term the euro might be strengthened if some of its weaker members headed for the door. But in the short term banks across the eurozone might have to be closed to prevent a run on the single currency as investors speculated about which country might be next. A new wave of bank nationalisations would be likely to follow as lenders counted their losses on now worthless Greek debt.
controls would have to be imposed and borders shut to stop money flooding out
And the financial crisis in Europe is
going to continue to spread well beyond
was downgraded to A3 from A1 with a negative outlook, Italy was downgraded to
A3 from A2 with a negative outlook and Portugal was downgraded to Ba3 from Ba2
with a negative outlook, Moody’s said. It also reduced the ratings of
Countries such as
But Barack Obama does not seem to understand this. He continues to pile another 150 million dollars on to our national debt every single hour. He knows that cutting spending significantly right now would hurt the economy and that would significantly hurt his chances for another term.
Needless to say, Barack Obama is not likely to do anything that is going to significantly hurt his chances for another four years in the White House.
So we continue to roll on toward disaster.
It is all going to seem like fun and games to some people until we hit the canyon floor.
Once that happens, nobody will be laughing.