It appears the eurozone has entered a deeper recession than the one caused by the 2008 financial crisis. The eurozone’s unemployment rate now stands at 10.7 percent, half a percentage point higher than at the peak of the last recession and the highest in the euro’s history. The rates for the most troubled countries are even more shocking, with 19.9 percent for Spain and 23.3 percent for Greece. Unemployment among the young is simply dismal, with rates of 48.1 percent in Greece and 49.9 in Spain for workers under 25 years of age. Carl Weinberg, chief economist at High Frequency Economics, called the numbers “appalling.”
Though world leaders praise the latest bailout for Greece, economists anticipate another global recession arising from Europe’s debt crisis, and a serious one at that. With Europe having a larger population, a larger banking system and more Fortune 500 companies than the U.S., a European financial system crash is sure to send shockwaves through markets around the globe. [click to continue…]
PIMCO has an unparalleled record predicting bond movements. They didn’t get to be the world’s largest bond fund by being wrong.
Mohamed El-Erain, PIMCO’s Chief Executive, is now predicting that Greece will be the first, but definitely not the last, European to attempt to solve its problems by default on its debts.
CNBC reveals El-Erain’s thinking:
“For the next three years, we’re going to see different economies work out different problems. For European economies, especially Greece, it would be through default,” Mohamed El-Erian, chief executive of PIMCO, told reporters in Taipei on Wednesday via a video conference.
This isn’t the first time El-Erian has predicted that Greece would default. He thinks the other European nations (read: Germany) are pounding billions down a rat hole by putting more money into the wastrel nation.
And on an even less cheerful note, El-Erain said it was “unlikely but not impossible” that a Greek default would trigger another global financial crisis.
Listen carefully to what El-Erain says. Betting against him and Bill Gross is not a wise investment strategy.
The EU’s inability to control the Greek debt situation (“situation” being a euphemism for “crisis”) is sending tremors through the world’s currency and equities markets.
Problem is, the world’s markets fear that the Greek debt problems may spread to other countries. For example, Moody’s has already hinted that it may downgrade BNP Paribas SA and two other large French banks as a result of their exposure in Greece.
“The probability of a eurozone Lehman moment is increasing,” said Neil Mackinnon, an economist at VTB Capital in London and a former U.K. Treasury official.
Greece has spent itself right up to the edge of the abyss, yet Greeks don’t want to give up their cushy jobs, extravagant perks and early retirements. No, they think that someone else should continue to pay so that they can continue to play.
Now they’re protesting in the streets to protect their lives of leisure, but we’re pretty sure that none of the protesters were willing to protest any harder than they work:
You know how you sometimes see an event unfolding in what seems to be slow motion and yet you remain frozen in place and unable to react? That’s exactly how the EU is now reacting to the Greek fiscal fiasco.
Unlike its recently deposed leader, the International Monetary Fund is impotent. They’re pretty sure something needs to be done but no one agrees on what. So the Eurocrats have worked up a dandy selection of equally unworkable plans.
Michael Darda, chief economist and chief market strategist for MKM Partners, says despite the mirage of low central bank interest rates, monetary policy really doesn’t look very loose in Europe.
With the ECB tightening monetary policy now, with the first hike in almost three years, the European periphery will be forced to essentially contract and deflate, and endanger the entire Eurozone. With this backdrop, austerity will fail.
When you look at the total Eurozone nominal GDP growth, it slowed to a 1.2% annualized rate. That means the the ECB benchmark rate of 1.25% is higher than GDP. That’s not easy money, that’s a prescription for a recession.
With the rest of the Eurozone flat on it’s back, the strength of Germany will not be enough to save Europe.
“It’s not unthinkable that the euro could collapse. know some people think it’s unthinkable … I don’t think it’s unthinkable” He added, “”You can’t have three or four or five countries that are in effect free-riding on the other countries. That won’t work over time — they have to get their fiscal houses in reasonable harmony.”
The “other countries” is essentially Germany. How long will the Germans put up with paying for the more fiscally irresponsible Eurozone nations.
The European Union wants to put the sovereign debt crisis behind them, but Portugal is not cooperating. The EU has a bailout program for them, but the austerity measures Portugal would be required to take look likely to be defeated this week.
Portugal’s main opposition parties told the beleaguered minority government they won’t budge from their refusal to endorse a new set of austerity measures designed to ease a huge debt burden that is crippling the economy.
The new steps are likely to be rejected in a parliamentary vote expected Wednesday and the timing could not be worse. A defeat in the vote, Prime Minister Jose Socrates warned, would trigger his government’s resignation, consigning Portugal to at least two months of political limbo just as officials were hoping to boost investor confidence in the country’s future.
Kicking the can down the road. It’s a game politicians of all countries love to play.
The pleas [by weak Euro countries] by now have a familiar ring. More than a year into the debt crisis, Europe still faces much the same problems as a year ago — except that after endless promises, negotiations, and two bailouts, jittery markets now appear at the end of their tether.
Earlier this week, Moody’s cut its rating on Greece, and today they took a swipe at Spain. These downgrades come ahead of the March 24-25 EU summit in Brussels.
Moody’s downgraded Spain’s credit rating on Thursday, citing worries over the cost of the banking sector’s restructuring, the government’s ability to achieve its borrowing reduction targets and grim economic growth prospects.
The agency reduced Spain’s rating by one notch to Aa2 and warned that a further downgrade is possible if indications emerge that Spain’s fiscal targets will be missed, and if the public debt ratio increases more rapidly than currently expected.
The Middle East revolutions and protests and nocked the Eurozone sovereign debt problems off the radar lately. But rest assured, the problems are still there and they are getting worse. Here’s Reuters reporting from Brussels today:
Feb 17 (Reuters) – European Union member states are increasingly concerned about Portugal’s ability to fund itself in financial markets and believe Lisbon will have to seek a bailout by April, a euro zone source said on Thursday.
The EU has a rescue plan ready for Portugal, but it is dependent on Lisbon asking for the aid and making that request to both the EU and the International Monetary Fund. Portugal remains adamantly opposed to asking for assistance.
“Portugal is drowning. It’s not going to be able to hold on beyond the end of March,” the euro zone source said. “That’s already understood to be the case in financial markets, but now it’s also understood among (EU) finance ministers.”
The world is a mess. I know, it’s never not messy, but at this point, we seem to find ourselves at a tipping point of sorts. And it won’t take much to ignite a fuse to a bigger explosion than any of the situations we are seeing blowing up now
All the billionaires are in Davos, Switzerland this week to see how they can make more billions. Erik Schatzker of Bloomberg Television’s “On The Move” caught up with investor George Soros and got a great interview out of him. They talked about the European sovereign debt crisis, the outlook for commodities and the U.S. deficit.
You won’t walk away form this video feeling too good about where the world is headed, unless you are one of those billionaires in Davos who will find ways to profit from our sorrow.
You either love or hate George Soros, and I fall into the latter camp. But I still forced myself to watch it and found the interview enlightening. You should take ten minutes to listen in.
Okay, I admit it, I’ve got a man crush something bad for Nigel Farage, UK Representative to the European Parliament, and leader of the UK Independence Party. In this clip he gives a trashing to the European Parliament in Strasbourg on January 19, 2011. The subject: the disaster that is called the Eurozone. After his two minutes are up, Olle Schmidt representing the Group of the Alliance of Liberals and Democrats for Europe, tells Nigel he’s clueless, and stands up for the Euro. Of course, Farage gets in the last word.
Listen to my man Nigel give the European Parliament members hell.
We need leaders like this in the United States, leaders who are not afraid to speak the truth, who speak their mind freely, and say damn the consequences of “impolite” speech, not like the sissy leaders we have lawmakers this country.
Just to show you what wusses we’ve become in the U.S., listen to the horror expressed by CNN host John King, when guest Andy Shaw used the term — you might want to close your ears — “in the crosshairs.” (h/t IHateTheMedia.com).
So far, Italy, the third largest economy to use the Euro, has been able to keep its distance from the sovereign debt problems facing other PIIGS. But, recently its economic woes are coming to the forefront. How long can Italy go without seeking its own bailout?
There’s no one like European Parliament Member and leader of the UK Independence Party, Nigel Farage, to give it to us straight. I love this guy — whether it’s the global warming fraud or financial corruption, he tells it like it is. About Italy, the rest of the PIIGS and the whole Eurozone mess.
Farage is also concerned that the disappearance of political sovereignty after bailouts will give rise to violent nationalist, political groups:
When you join the Euro, you give away control over interest rates and now that they’ve been bailed out, they’ve given away the ability to decide their own budgets. Greece and Ireland have now become protectorates of the European Union. They’ve lost their democracy, they’ve lost their self-government, and I’m deeply fearful, I do feel, that extreme political groups, even violent political groups, will now be on the rise, because if people feel they cannot alter their own destiny by voting, what are they left with?
And I love this reply, when asked about why Estonia could still join the Eurozone:
This is an empire…the European Union is the first ever non-military empire and what empires try to do is expand.
R. Arthur Beckles: Barack Obama is President of all Americans, not just of African-Americans! It’s difficult for all working class Americans – black, white, brown, etc. African-Americans who don’t want to vote for Obama, can feel free to do so. But do they think that their lot...
keith: wow. Whos got the bigger stick, My @!(k is bigger than yours, your country my country, my countries poor is richer than yours. the truth of it is that in the end the civilians are going to feel the brunt of this economic downfall. i live in the U.S. and there are over 200 multi...
Anonymous: I agree with many of the above. I know people from both the US and Europe that are on disability because of health problems and the one person in Europe is receiving much more help than are the US citizens.
Sunday: BTW, before you ask why two adults only received $240 a week for unemployment, just remember that you can only receive unemployment if you were laid off. If you were fired or quit, you cannot receive unemployment. In my case, I got ill, and FMLA only applies to people who have worked at a...
EriktheRed: I like how it’s “fortunate that the crisis is confined to the E.U.”- what’s unemployment in the U.S. right now? How about the millions of foreclosures you’ve had already? Tent cities, anyone? Deficit spending at $3.5 bn a DAY? HMM!
David, Self Defense Retailer: Really? Why in the world are they doing that for Gitmo detainees? A whole soccer field? Outrageous! Maybe the EU really won’t last.
David, Stun Gun Supplier: It’s the next bubble. I wonder what Romney has to say about this. Obama’s made himself clear in his typical way. It’ll probably be worse than housing when it does.
See I told you: Who didn’t see this coming . Put a communist organizer in the White house and just wait. To bad the American populace lacks true intellect or is it just that the dummies out number the smart 20 to 1. Probably the latter. Obvious who controlls the vote with those kind of...
James: After a seriously obese person has had fat removal procedures, his/her flesh sags where excess fat used to be. World population should never have risen this high. It will be reduced. Through lower birth rates; or by more traditional means: war, disease, famine, cannabalism. I’m not a...
JoAnn: I have a real problem with Obama borrowing money to send to Greece when so many people in this country who have lost long term jobs,lost homes,living on the street, little or no food. I vote to take Obama and his family if they want to go and DROP them on a desert island some where just so...
Arkansas Slim: Update. Oil hit 105 per barrel yesterday, 2 20 12. Gas US Avg => 3.50 per gallon. Cloward Piven Theory of Economics: Tipping point of US Electorate => 51%. Nevada odds for Obama RE Election 6/10 on thier sport boards. EU/Greece set to collapse, dominos arranged. Socialistic...
kkl: America is now turning mediocre no more fun no more trips or vacations 100 bucks to fill gas tank and pasta and ramen noodles for life for usa there is no more hope no more fun just work go home work go home fill up gas tank eat shit and work no more fun thanks for nothing nobama i hope you...
Chris Marshall: Hi Janice, I just wanted to know, how would you be able to get a good investment out of the Whole Life Insurance if it costs really high? The projections usually given out by “Financial Advisors” that 12% is the usual earnings specially if it is invested in TSX or NYX...
Agent: Walt Disney funded Disney World by using the cash value in his whole life policy. You can’t say that was a mistake. Buy term for a specific need/period and buy whole for a permanent need or if you need your life insurance past age 65.
Forex Agent: As a financial advisor what I tell clients is that the main purpose of a life insurance policy is to provide a death benefit. Whether term, some sort of permanent life insurance, or a combination of the two is most appropriate depends on a number of factors including the...
Cindy: Before long they will, if not already, invade and keep track of everything you do including the privacy of your own home exploiting you and demanding that you worship them. You will be powerless to control it so you will have two choices…… ;kiss butt or commit suicide.
Space Cadet: don’t be rediculous. Glass Steagall is a red hearing. This problem is much farther reaching, from before the Nixon Administration. He took the US off the gold standard which was the pillar of the US dollar, and the reason it is the world currancy. He did that because the US...
Hervy: Very good advice, same as I give when talking to people. Clark Howard and Dave Ramsey are both good sources of information that is inline with what is written here at EC. Another good website that i tell people to go to in order to get an easy calculation of how much insurance to buy is...
BenP: This is part of the cannon fodder that will be used against Obama in 2012 and his administration. It’s not that he is horrible (he is) or worse than any other President (about the same), its that examples like these can be used to show the devil you know has got to be worse than the...
Lauren: Personally I think you sound like an idiot. The NIH spent 55,000 to promote a vacine that does not exist and, one of which, they would not fund to discover in the first place(yes, it’s ture look it up). If someone lives in an area with a lot of storms they already understand the...
Matt USA: I know I’m a little late to this discussion, but I think that the economic collapse scenario has changed somewhat in recent weeks. It appears that Europe will go first, followed by the United States who has gambled and lost on a TARP style European bailout. The real question for...
Kim: Marcy, Rep. Alan Grayson said in the attached youtube video in 2010 that Fannie Mae and Freddie Mac both own stock in MERS. How much stock and when did they own it? Would this explain their current actions? Did they move loans out of MERS and into Fannie Mae for the tax payers to bail out?...
China: @Serban Enache , You Are Wrong We are In Lot Of Trouble and you Know This , Starting In 2012 We will have Many Many Different Problems , We The Government Is Paying For All This Building , We Know Our Own Citizens Can’t Afford This Type Of Live Style , but we are building it Any way...
City On a Shining Hill: “The problem with socialism, i.e., the failed economic system being adopted by so many nations in the world today, is that in funding entitlement programs voters want in their politicians and having governments fund retirement, health care, education, etc, is that...
Rider I: How the US has historically used mineral rushes to get it out of Deficits and stop foreign economic take over. In the US’s historical past the Druids have used and impressed upon the US leadership to use mineral resources to stop economic warfare, along with military take over....
Financial Collapse: Everyone needs to get this correct… (REPOST ON TWITTER, FACEBOOK) America is controlled by the 3 privately owned states (district of columbia, the city of london, and the vatican.) Each has it’s own flag, pays no taxes and has it’s own laws. All 3 are part of...
Tm Newman: I graduated with my B.A. in psych/soc a year ago. Interned teaching math and English to fourth and seventh graders. The school shut down due to lack of funding. All the kids got shipped off to public school. I can’t find a position in my field, and there are no teaching jobs in...
hefsmaster: Been a slow couple weeks since the downgrade. News wise that is. But it gave me more time to coin a phrase. You’re a true libertarian when you piss everybody off. Which explains why everybody thinks were nuts and relegated to being a third wheel in politics. Well call me and...
PeacefulPatriot: The worst is yet to come in the realm of austere measures to keep up appearances on the global markets. The truth though is quite obvious to the sane members of society, we have reached a break point and it is the Systemic collapse of the post-industrial globalization bubble. All...
Serban Enache: Pearl Harbos was orchestrated as an operation years before WW2, by the British empire in conjunction with Imperial Japan. The japanese elite didn’t surrender even when they did not have any hope of wining, let alone after Hiroshima, though I don’t agree with the two...
hefsmaster: No, despite these guys obvious failings. He is exactly right. You think japan would have attacked us without any allies. Pearl harbor is an effect from a cause. Without hitler, point is mute. By the way lee, you haven’t copied anything in a while. You a congressman?
Serban Enache: This Larry Summers has some nerve. Is he trying to say that Hitler attacked Pearl Harbor?
Gordon Shumway: Two questions: 1. Why is it a felony for an individual to print money, but evidence of a keen insight into the arcane world of macroeconomics when a bankster does the same thing, only on a vastly greater scale? 2. Since those who are running the Fed and Treasury are supposed to be...
tim: i for one will not pay a single dr bill my sickness is caused by our government let’s take it back already raped and brusied lady liberty is not what she stood for so many years lets scrap the statue that means so little any more freedom is prison in america try being disabled for 20...
tim: well about time someone in power noticed what wool us seniors have to face daily after food shopping go to my drug store same tricks and and cost is up 25 percent then dr co-pays up another 20 % what will we do when money social security doesnt go far enough to keep us healthy
Space Cadet: Does it matter how we got here? The people in charge ‘think’ they are so smart that they will finesse our way out, while staying in power and making a ton of money for their pals. We will be left to pick up the tab and clean up the mess, as usual. My neighbors just got...