Contagion And The Viral Spreading Of Debt Based Systems


The biggest economy in the world just reached a new peak with their unemployment rate.  We are not talking about the United States but the massive block in the Eurozone.  The unemployment rate in the 17 country block reached a new all-time high at 10.9 percent as austerity measures are being used to combat massive levels of debt.  There is no single rule of thumb as to how much debt is too much.  A few respected economists from the 1800s once stated that too much debt is reached when the market suddenly acknowledges that too much debt has been reached.  In Europe it appears that this apex of debt has been reached and certainly in a handful of economies too much debt has been reached. The trouble of course is that Europe is a massive trading partner to the US but also the world.  It is naïve to think that issues in the European zone will not trickle over to our already fragile economy.  The working and middle class are likely to have another tough challenge put ahead of them as countries overseas begin redefining what life is like with too much debt.        


The economic impacts of contagion

Two economies that are deep into severe recessions, practically depressions are Greece and Spain.  Their unemployment rates are reaching levels that are likely to produce political instability:

spain and greece unemployment rates

These are unsupportable levels for any industrialized nation.  The middle classes across the world are dealing with central banks that have produced too much debt to cater to large financial interests.  Europe has taken severe austerity measures and so far, it has not had a beneficial impact to the EU.  The unemployment rate in the Eurozone is now at an all-time high:

euro zone unemployment rate

This trajectory is not healthy.  It is interesting that while much of the attention is guided towards Europe we here in the US keep on printing digital money like it was going out of fashion.  We have a perfect case example of too much debt being misallocated to support the bailout of banks and here we go printing more and more digital currency and to what effect?

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