Tag Archives: European debt crisis

A Grim Global Outlook

European Summit

The outlook for the global economy continues to get bleaker and bleaker. This week the focus remains on the euro as European leaders are meeting for the twentieth time in two years to discuss and attempt to resolve an increasingly hopeless financial situation. The two day summit in Brussels is more contentious than ever, pitting the embattled profligate countries of Southern Europe aligned with newly elected French President Hollande against the disillusioned Germans eager to distance themselves from any more bailouts or debt exposure.

The situation in the Eurozone is fluid to put it mildly. Spain continues to struggle financially as its banks hover over the abyss of insolvency, ominously watching their short term (6 month government bonds) borrowing costs triple Tuesday. Italy is not fairing any better – their six month borrowing rates rose a whopping three percentage points during a bond auction earlier this week. Meanwhile, the newly elected Greek government is trying to maintain its fledgling coalition by renegotiating a deal with the Eurozone to ease its austerity requirements, their Election Day promise.

With divisions hardening and financial crisis intensifying it is not a surprise that investor confidence is withering and the euro continues to fall in value. At its core, the main issue beleaguering the Eurozone is debt contagion. Spanish Prime Minister Rajoy put it succinctly, “The most urgent issue is the one of financing. We can’t keep funding ourselves for a long time at the prices we’re currently funding ourselves.”

Who will pay Europe’s debt is the principle question. There is a famous saying, “everyone is your brother until the rent comes due.” As Europe’s paymaster, Germany can certainly relate. Hollande and his Italian and Spanish counterparts want Germany to shoulder more of the burden, asking the ECB to issue Eurobonds. The Germans object. “As long as I’m alive,” Chancellor Merkel reportedly said, we will not accept any solution that requires more pooled debt at our expense.

Hard Landings in Emerging Markets

As fractured as things are in Europe, troubling signs are beginning to arise in emerging economies too. Indian Prime Minister Manmohan Singh met with government officials Wednesday to discuss souring investor confidence in India. As foreign investment has dipped, the Indian economy has slowed to its lowest growth rate in nearly a decade. The rupee has sunk to all-time lows against the dollar, inflation is high, and the government is struggling to cope with enlarged fiscal and current account deficits.

To arrest these trends, Singh, no stranger to boosting economic growth, has taken charge of the finance ministry. Singh is credited with engineering major reforms in the early 90s, which paved the way for India’s economic jolt. But his task is much more difficult this time around. India’s growth rate has fallen sharply in early 2012 to 5.3%, down from over 9% in the first quarter of last year. If Singh wants to “restart India’s growth story” he will need to implement drastic reform in everything from insurance to tax policy – not an easy task.

With the global economy stressed particularly in the West, China may stand to lose the most. Problems are starting to pile up in Beijing. Chinese leaders continue to wrestle with a property and construction bubble, spiraling local government debt, and huge gaps between rich and poor. Further, government growth projections have been adjusted in the current Chinese five year plan. It projects annual growth at a meager 7%, well below its near steady 10% growth over the last two decades.

Growth is paramount in China. Without it, supporting its huge population is nearly impossible. China’s export based economic model may be their undoing. When foreign markets cannot buy Chinese goods, especially western markets, China falters. The euro crisis is a big problem because Europe comprises 20% of their export market.

Given the worsening situation in Europe and elsewhere China could be headed for what analysts call a “hard landing.” Significantly lower growth rates in China could produce social unrest and major instability. Finance Professor Franklin Allen of Wharton Business School views a hard landing in China as unlikely, unless the euro blows up that is. The IMF agrees with his assessment; they believe a worsening euro crisis could bring China’s growth levels down to a dangerous 4%.

Revised Forecast in US

At home, financial analysts are flexing to the continuously erratic stock market, up one day down the next. US economic indicators have given somewhat mixed signals. Some reports show housing prices are beginning to stabilize, a very positive sign for the US economy. But other news has not been so good. According to Bloomberg, consumer confidence is at five month lows, probably driven by last month’s disappointing jobs report.

After a somewhat promising start to the New Year, the US economy is returning to its recent sluggishness. As a result, the FED revised its rosy projections for 2012, predicting that unemployment will remain high and growth tepid for the next couple years. US corporations have felt the pinch too, seeing declines in overseas revenues resulting from the global slow-down.

Nevertheless, it’s the US banking industry that has received most of the attention of late. Earlier this month Moody’s Investors Services downgraded 15 major financial institutions, Citigroup among them, dealing yet another blow to Wall Street’s already sullied reputation. JP Morgan has also come under fire not just for losing billions in risky bets but for suppressing a report on the municipal bond market completed last year. JP Morgan’s report, which was only distributed to privileged investors, revealed that the municipal bond market is far more indebted than originally suspected. It is worth noting that JP Morgan underwrites many US muni bonds.

Bad to Worse?

In the aggregate and that’s all that matters at this point, the world economy is steaming into rough seas ahead. Though there is a possibility that the Eurozone could survive, that emerging markets could return to sustainable levels of growth, and US markets could rebound sooner and stronger than anticipated, the chances of that happening are remote. The more likely outcome will be a global economic rebalancing, a restructuring of the world economy. It would unquestionably be a painful process, but a more sustainable and healthier world may emerge in the end.

Cameron Macgregor is a former naval officer and USNA grad. He is writing his first book.

Bad News for Globalists

European business activity fell in May, nearing a 35-month low, according to a survey by Markit. Its survey, based on European manufacturing and service sectors, fell to 45.9. The euro fell to a 22-month low against the dollar in response. Disagreement at Wednesday’s summit between European leaders about how to solve the dilemma did nothing to boost confidence.

Chris Williamson, chief economist for Markit, said research indicated the downturn had “gathered further momentum in May. The survey is broadly consistent with gross domestic product falling by at least 0.5% across the region in the second quarter, as an increasingly steep downturn in the periphery infects both France and Germany,”

Economic reports show that concerns over Greece are having a broader economic impact than originally expected. “It clearly indicates that the evaporating sentiment that we have seen in recent weeks, as the Greece crisis has intensified, is having a big impact on the economy” said Peter Dixon from Commerzbank.

Socialist President Hollande wants France to increase spending; a plan Chancellor Angela Merkel says Germany will oppose until there is more budget discipline across Europe.

Facing the reality that sovereign nations will retain and defend their own national views, interests and sovereignty is bad news for Globalists. New World Order proponents saw Establishment of the European Union and eurozone as an important step in the march towards their grand vision of One World Government.

Theorists within the “progressive” movement have envisioned such an eventuality since the early Twentieth Century. Woodrow Wilson, after winning re-election in 1916 on the campaign slogan: “He Kept Us Out Of War”, entered WWI in order to involve the United States in world affairs, thereby creating justification for his desire to establish the League of Nations.

While in Paris after the war, Wilson engaged in creation of the League of Nations while also helping shape the Treaty of Versailles. The Versailles Treaty resulted in economic devastation within Germany, leading to the rise of Adolph Hitler’s Nazi Germany. In 1919, Wilson and a Republican controlled Senate fought over giving the League of Nations power to force the U.S. into a war, a clear violation of Article One, Section Eight, Clause Ten of the United States Constitution, which assigns Power to declare War to the U.S. Congress. To the credit of Republicans in the Senate, they stood for U.S. sovereignty, rejecting the Treaty of Versailles, and voting against U.S. entry into the League of Nations.

Although the League of Nations proved completely impotent in the prevention of WWII, that didn’t deter “progressive” Globalists from forming the United Nations. The original aim of the UN was to keep peace throughout the world, develop friendly relations between nations, to help eliminate poverty, disease and illiteracy, stop environmental destruction and encourage respect for rights and freedoms. These aims were based on, among other principles, that all member states would have sovereign equality and that the UN was not to interfere in the domestic affairs of any country.

Pending before the United States Senate today are threats to U.S. national sovereignty:

The Convention on Biological Diversity, the Law of the Sea treaty, the International Labor Organization Convention No. 111, the Inter-American Convention against the Illicit Manufacturing of and Trafficking in Firearms, Ammunition, Explosives, and other Related Materials, the Stockholm Convention on Persistent Organic Pollutants.

Additionally, there’s Agenda 21, which dictates action to be taken globally, nationally, and locally in every area where humans directly affect the environment. If the Agenda 21 agenda doesn’t clearly describe the UN interfering in America’s domestic affairs, what would? The Law of the Sea treaty, if ratified, would grant the UN mineral rights within U.S. territorial waters. If that’s not a violation of national sovereignty, what is? Were the firearms treaty to be ratified, the UN would then have control over arms within the United States, an open violation of the Second Amendment to the U.S. Constitution.

It’s time for Americans to stand up for national sovereignty and kiss the UN, Globalists and One World Government “progressives” goodbye. The best way to accomplish this is to do what Americans did in 1920 after Woodrow Wilson’s early attempt to violation American sovereignty. Elect Republicans in a landslide.


Europe: From the Welfare State to the Totalitarian State?

Thanks to the voters who put Obama in the White House in 2008 and Democrats in charge of Congress in 2006 elections, the hard-line left has been able to determine the course of America over the past 3.5 years. In the 2010 election a majority of voters issued a restraining order on the runaway leftists who thought they were invincible after 2008. But so long as we have a radical in the White House and a Democrat Senate majority that gives the president a pass on every decisive power grab he wants, we are going to continue down the path that the hard-line left staked out in ’08.

That path goes straight into the murky backwoods of big-government Europe. We have already seen numerous examples of how the Obama administration is Europeanizing America: from anti-business environmental regulations to health “reform” to socialization of student loans to the continuous assault on state sovereignty. Everywhere they can they create another government incursion into the lives of private citizens.

Since the Obama administration and its allies in the Senate want to continue down the path of Europeanization, we need to look at what is going on in Europe and learn from their mistakes. We already know about the disastrous fiscal situation in welfare states like Greece, Spain and Portugal and what that will mean for America, should we continue to build a European welfare state here. What is less known is that the harsh austerity policies used in Europe to save the welfare states from inevitable collapse, are also having serious repercussions beyond the realm of economics.

As a result of a continuous downward spiral of unemployment, higher taxes and economic deprivation, Europeans are becoming increasingly desperate. Even politically. Support for extremist political parties is rising all across the European Union. in the harsh economic realities created by a crumbling welfare state and destructive austerity policies, authoritarian political movements are experiencing a new dawn.

Not surprisingly, Greece is the scene of one of the strongest surges in extremism. Nazis and Soviet-style Communists are rapidly gaining ground among voters and could make big gains in the upcoming parliamentary elections. In France, the leader of the National Front, Marine LePen, got 20 percent of the votes in the first round of the presidential election, placing her a close third among all voters. Her support among first-time voters surpassed that of any other candidate, which puts her party in a very favorable position for local and regional elections in the next few years.

In Hungary, one of the youngest members of the EU, the new government has brought back an old-style, dingy European form of nationalism that is openly threatening the country’s parliamentary democracy. The success of the Fidesz and Jobbik parties was built on deep dissatisfaction among Hungarians with the austerity policies forced upon them by the European Union.

Even Britain, often considered the pillar of classic European liberalism, freedom and democracy, is tilting toward the shadows. The British National Party, which gained significantly in opinion polls back in 2009, seems to have survived internal faction-fighting and is a frighteningly resilient player on the British political scene. Its fellow traveller on the authoritarian side of the political spectrum, the English Defense League, is a fast-growing, street-wise anti-immigration movement with an authoritarian touch and a disdain for the British parliamentary system.

In Sweden, the openly un-democratic National Democrats have seats in several city councils and are preparing for participation in the 2014 national parliamentary elections.

All these parties have one thing in common: they want to preserve the welfare state and they blame its decline on a combination of economic freedom, free trade and immigration. They are generally prepared to save the welfare state by sacrificing or severely restricting political freedoms and parliamentary democracy. They propose far-reaching government control over the economy – the differences between them are limited to how much of private property rights they want to take away. Other than that, they all stand for higher taxes, preserved or expanded welfare programs and harsh control of businesses. They also want to restrict free trade and more or less close national borders.

What is emerging in Europe is nothing short of a totalitarian attempt at defending the inherently failing, and doomed, welfare state. If this movement becomes stronger, history from the 1920s Germany will eventually repeat itself. The German leaders during the Weimar republic did everything they could to preserve their welfare state in the face of enormous economic problems. Since the economy could not afford the welfare state, and since they were ideologically married to keeping it, the Weimar government tried its very best to shrink entitlements to make them fit the ever shrinking tax base. In a desperate measure to try and avoid the inevitable they started printing money en masse. The currency collapsed, economic and social chaos took over – and the road was paved for the NSDAP to march into Berlin.

With exception of the money-printing part, all the ingredients are there: a “higher” cause that motivates repealing political freedoms; a crisis to rally people around one leader; and a convenient group to blame. This group is not the Jews this time, but non-European muslims. It is a fact that Europe has received more muslim immigrants than the continent can handle, but this does not mean that they are the origin of the economic crisis. And it certainly does not mean it is legitimate for power-hungry, authoritarian-minded politicians to play the “blame game” on them.

The only ingredient missing is hyper-inflation. So long as countries like Greece stay within the European currency union they won’t be able to print money and destroy a currency in the name of saving the welfare state. However, there is a scenario where the EU can give up on Greece, and Greece give up on the EU. If the Greek government feels that their democracy cannot surviv another round of austerity, they may very well decide to leave the currency union, reintroduce their national currency and monetize their deficit. This would add the final ingredient and resurrect Weimar.

When one country has left the euro zone, pressure is going to mount for others to do the same. Spain and Portugal would be next, and the probability is high that they would take to the monetary printing presses to try and save their welfare states. It is not going to work, of course, but before they realize that they will also have stirred up the same ugly stew that brought Hitler to power in Germany.

A breakdown of Europe’s currency union was unthinkable two years ago. Today, more and more analysts are pointing to it as a credible alternative in the next couple of years. Likewise, the resurrection of authoritarianism in Europe has been unthinkable for a great long time, yet that is precisely what is happening.

With this in mind, and given the fact that America’s left is pushing hard to transform us into Europe 2 – how unthinkable is it that we might also experience a turn toward authoritarianism in the future? Just how far are American lefitsts willing to go to defend their welfare state project?

Fed's Bernanke Props Up EU With Loan-sharking Scheme

U.S. Federal Reserve Chairman Ben Bernanke has reached out to Europe in what is being mischaracterized across America as just another European bailout. Bernanke realizes the U.S. Congress would never allow the Federal Reserve to put the U.S. Economy at further risk by directly bailing out the European Socialists, in which we are already exposed to the tune of owning 20% of the IMF debt-fund, which is basically bankrupt. The EU announced that they would be increasing the cash flow to prevent several countries from going insolvent a short while back, in hinting that China and Japan would agree to buy up more European debt. The only problem there,  is that China refused to buy into that scheme without seeing solid austerity measures put into place, which the EU refused, or was incapable of doing.  Simply put,  Europe was a very bad credit risk, and China turned them down which was very embarrassing to the EU grand banking manipulators, who had already announced more cash was on the way.  

Understanding Bernanke’s Loan-Sharking Scheme

Bernanke then decided to play the role of loan-shark king, in lowering interest rates for dollar swap lines to the ECB (European Central Bank) along with cooperation from four other major central banks (Canada, England, Japan, and Switzerland). Bernanke is attaching the European debt crisis exposure to the banking systems of the other 4 country’s mentioned above in a move to cloud the fact that he is lending more money ( and collecting lower interest rates) to the European Socialists Union, which should actually have been declared bankrupt over a year ago. Does anyone believe for one minute that Canada, Japan, Switzerland, and England are going to put their economies at risk by buying into the debt-disaster of the EU, the IMF, the ECB and the EFSF? Of course not. The EFSF, or the European Financial Stability Fund ( boy is that an oxymoron if ever there was one) has yet to explain just what their role will play in all of this.

Yet globalists paint this scheme in a rosy hue by declaring that the European Central Bank, which has been reluctant to intervene to stop the growing crisis on its own continent, was joined in the decision by the Federal Reserve, the Bank of England and the central banks of Canada, Japan and Switzerland. Central banks will make it cheaper for commercial banks in their countries to borrow dollars, the dominant currency of trade. Just what effects will this have on the value of the U.S. dollar, long-term? But while it should ease borrowing for banks, it does little to solve the underlying problem of mountains of government debt in Europe, leaving markets still waiting for a permanent fix. What is that term Obama and Congress love to toss at the American public so often today? That’s right, they use the “We can’t continue to kick the can down the road” analogy constantly, yet this is exactly what the EU and Bernanke are condoning with this latest move.  Where do Germany and France stand on all of this?

The stock markets rallied upon Bernanke’s announcement of the Fed lowering its dollar-swap interest rate, and China’s easing of it’s monetary policy for the first time in several years by reducing bank reserve requirements by 50 basis points. This may be the first of several Chinese easing moves, and it certainly added to the stock surge. Again, take note that China is not willing to buy into the EU debt-disaster, but instead slightly lowers their bank reserve mandates. Also missing from this equation are the two biggest economic elephants in the middle of the EU, France and Germany. Simply put, after Deutshe Bank of Germany received massive bailout funds from the IMF, EFSF, and the ECB schemes that prevented them from suffering massive losses due to the previous buying of EU debt , and they now refuse to take the risks to provide any funding to bailout Greece, Italy or anyone else in the EU, including the newly exposed and problematic French debt-crisis.

The bottom line here is that this is all just another batch of phony solutions to a rapidly-expanding European debt-crisis that was created by the Euro-Zone Globalists, and which is heavily rooted in anti-capitalistic, utopian Socialism and the ever-present denial of the realities of their irresponsible actions.  Nothing has been solved here, much to the dismay of Ben Bernanke, who actually believes that this latest loan-sharking scheme will fool Congress into somehow thinking that Bernanke waved his magic wand and thus prevented the European insolvency that China now sees as inevitable. ( as is proven in their refusal to further buy into the European Socialists massive debt problem nightmare)  Are we to believe that the ECB can just write a trillion dollar check to further prop up the EU’s fast-growing number of bankrupt countries? On top of that, how can the IMF expect to be allowed to borrow another $800 billion from the ECB to give those same bankrupt countries even more money? The bottom line is that they can’t, simply because the money just isn’t there, especially with Germany and France now refusing to participate in any further bailouts without the creation of a New EU treaty. Merkel and Sarkozy have made Europe into a Communist collective that was built on the Socialistic catch-phrase of  denying protectionism, or the rights of European countries to control their own economies through implementing sound fiscal policies. Now they want out of the communist collectivism that they have created to protect their own countries from falling off of the debt-cliff that Italy, Greece, Spain, and other EU infected countries are now on the edge of.  For the proof of Merkel and Sarkozy’s stealth demand for German and French “protectionism” from the European debt-crisis they helped to create,  check out this article neatly titled,  EU Planning a New Treaty. Oh what a tangled web we weave, when first, we practice to deceive.  Sir Walter Scott, 1771 – 1832.