FedUpUSA

Posts Tagged ‘Global Economy’

Nouriel has completely lost it, as has Niall Ferguson.

Is it one minute to midnight in Europe?

The failure of German public opinion to grasp the dire state of affairs in Europe today is inviting a repeat of precisely the crisis of the mid 20th century that European integration was designed to avoid.

Really?

Pray tell then, why is it that all these banks in Europe were permitted to issue credit without a single thing backing it beyond the belief that a new sucker would appear and take it off the issuer’s hands, thereby perpetuating a Ponzi Scheme of historic size?

I mean, it’s not like the consequences of this on an arithmetic basis weren’t known to everyone.  Stable economic conditions require that you not do that, or if you do allow it that the people who do it (1) can’t counterfeit the sovereign’s currency and (2) can’t become so intertwined in the financing of governments and major economic centers that their failure becomes an existential threat to your existence.

But both of those things happened, didn’t they?  And why?  Because the governments and people sat back and allowed it.

What is the situation today? Europe’s periphery is in depression. According to the IMF, gross domestic product will contract this year by 4.7 percent in Greece and 3.3 percent in Portugal. Unemployment is 24 percent in Spain, 22 percent in Greece and 15 percent in Portugal. Public debt already exceeds 100 percent of GDP in Greece, Ireland, Italy and Portugal. These countries, along with Spain, are now effectively shut out of the bond market.

Good.  These nations lied to their people about what they could support and spend.  They got caught. Now the pain comes.  It is unavoidable — all we are arguing over is whether the governments will face the music and so will the citizens and banksters that were involved, or whether someone will try to shove it off on someone else.

The process of political fragmentation is also speeding up. In the last Greek elections, seven in 10 voters cast their ballots for smaller parties opposed to the austerity program imposed on Greece in return for two EU-led bailouts. Established parties are also losing out to splinter parties in Italy, where the comedian Beppe Grillo’s Five Star Movement has just won control of the city of Parma, and in Germany, where a maverick party called the Pirates is all the rage. Less frivolous populists now have substantial support in France, the Netherlands and Norway. This trend is ominous.

There’s nothing ominous about it.  The people got nothing in Greece for their acquiescence.  The banksters got all the loot, and the people got fucked.  Royally, serially, repeatedly fucked.

Why should they stand for this?  What they should do is rise and remove some heads.  Peacefully if possible, the old-fashioned way if necessary.  Peaceful political process only works until the political process fails and is co-opted and stolen by the very people doing the looting.  Then it’s not a representative government anymore, it’s a jackbooted fascist dictatorship and the people have every right to overthrow it, exactly as was demonstrated here in The United States in 1776.

Men and women tend to suffer these ignobilities for far longer than they should, and this is probably a good thing on balance, as resolution when a dictatorship has taken over your nation is almost always messy and fraught with the highest of risks.  Nonetheless, if this is what has happened the solution is singular and clear to anyone who thinks clearly.

What we are left with as a question at this time is whether or not this has occurred.

The way out of this crisis seems clear.

First, there needs to be a program of direct recapitalization — via preferred non-voting shares — of euro-zone banks both in the periphery and the core by the European Financial Stability Facility (EFSF) and its successor the European Stability Mechanism (ESM).

No.

The institutions that lent money that cannot be paid back must take their losses.  If they cannot then their stockholders and bondholders must be zeroed if necessary to cover depositors, and any alleged “superior” status on derivative instruments must be voided.  In short, depositors must be senior to all; the rest of the capital structure falls where it does.  And fall it will.

That’s fine.  These nations should, at the same time, both enact One Dollar of Capital for all institutions going forward and prosecute all banksters who blow sky high for effectively counterfeiting the currency, because that’s exactly what they did.  Put them all in prison.

Of course, over time, sound banks that restore capital through earnings would be able to buy back the public preferred shares. So this partial nationalization would be temporary.

There is no such thing as a “sound bank” that has lent out more than the sum of its collateral taken against loans and its capital.  Such a bank has practiced an effective fraudulent device in that it has issued credit fungible with currency that it knows at the time of issue cannot be repaid in the present tense.  It therefore haseffectively naked shorted the currency.

This is a pyramid scheme as indefinite exponential growth, for any positive growth rate, is arithmetically impossible.  All we are arguing over is when, not if, the scheme will collapse.

Pyramid schemes are broadly illegal and must be prosecuted.  If the government will not do so then the government must be replaced with one that will.

Finally, given the unsustainably high public debts and borrowing costs of certain member states, we see no alternative to some kind of debt mutualization.

Nonsense.

None of the nations who are in the Euro agreed to this.  Committing public frauds for years so as to force someone else to rescue you via “mutualization” and “integration” of political systems is tantamount to the taking of political power by force from the people and giving it to those who are not elected.

This is commonly known as an act of war and is full and fair justification for those who have this imposed upon them to take arms and repeal the literal subversion and replacement by force of their political process.

Giving up some sovereignty is inevitable.

No it’s not — those who committed frauds can be prosecuted and imprisoned instead.  This is the correct course of action.

Ultimately, as Chancellor Merkel herself acknowledged last week, monetary union always implied further integration into a fiscal and political union.

Perhaps in Merkel’s mind.  But she does not speak for the other nations and their people.  Simply put, she is not Fuehrer over Europe, and if this is attempted I expect that what Roubini “fears” will come to pass — because it damn well should if Germany, or anyone else, tries to impose “political union” by fraud, threat, coercion or, most-unfortunately, force.

It is not just the United States that is headed for an economic collapse.  The truth is that the entire world is heading for a massive economic meltdown and the people of earth need to be warned about the coming economic disaster that is going to sweep the globe.  The current world financial system is based on debt, and there are alarming signs that the gigantic global debt bubble is getting ready to burst.  In addition, global prices for the key resources that the major economies of the planet depend on are rising very rapidly.  Despite all of our advanced technology, the truth is that human civilization simply cannot function without oil and food.  But now the price of oil and the price of food are both increasing dramatically.  So how is the current global economy supposed to keep functioning properly if it soon costs much more to ship products between continents?  How are the billions of people that are just barely surviving today supposed to feed themselves if the price of food goes up another 30 or 40 percent?  For decades, most of the major economies around the globe have been able to take for granted that massive amounts of cheap oil and massive amounts of cheap food will always be there.  So what happens when that paradigm changes?

At last check, the price of U.S. crude was over 104 dollars a barrel and the price of Brent crude was over 115 dollars a barrel.  Many analysts fear that if the crisis in Libya escalates or if the chaos in the Middle East spreads that we could see the all-time record of 147 dollars a barrel broken by the end of the year.  That would be absolutely disastrous for the global economy.

But it isn’t just the chaos in the Middle East that is driving oil prices.  The truth is that oil prices have been moving upwards for months.  The recent revolutions in the Middle East have only accelerated the trend.

Let’s just hope that the “day of rage” being called for in Saudi Arabia later this month does not turn into a full-blown revolution like we have seen in other Middle Eastern countries.  The Saudis keep a pretty tight grip on their people, but at this point anything is possible.  A true revolution in Saudi Arabia would send oil prices into unprecedented territory very quickly.

But even without all of the trouble in the Middle East the world was already heading for an oil crunch.  The global demand for oil is rising at a very vigorous pace.  For example, last year Chinese demand for oil increased by almost 1 million barrels per day.  That is absolutely staggering.  The Chinese are now buying more new cars every year than Americans are, and so Chinese demand for oil is only going to continue to increase.

Much could be done to increase the global supply of oil, but so far our politicians and the major oil company executives are sitting on their hands.  They seem to like the increasing oil prices.

So for now it looks like oil prices will continue to rise and this is going to result in much higher prices at the gas pump.

Already, ABC News is reporting that regular unleaded gasoline is going for $5.29 a gallon at one gas station in Orlando, Florida.

The U.S. economy in particular is vulnerable to rising oil prices because our entire economic system is designed around cheap gasoline.  If the price of gas goes up to 5 or 6 dollars a gallon and it stays there it is going to have a catastrophic effect on the U.S. economy.

Just remember what happened back in 2008.  The price of oil hit an all-time high of $147 a barrel and then a few months later the entire financial system had a major meltdown.

Well, as the price of oil rises it is going to create a whole lot of imbalances in the global financial system once again.

This is definitely a situation that we should all be watching.

But it is not just the price of oil that could cause a global economic disaster.

The global price of food could potentially be even more concerning.  As you read this, there are about 3 billion people around the globe that live on the equivalent of 2 dollars a day or less.  Those people cannot afford for food prices to go up much.

But global food prices are rising.  According to the United Nations, the global price of food has risen for 8 consecutive months.  Last month, the global price of food set a brand new all-time record high.  Many are starting to fear that we could actually be in the early stages of a major global food crisis.

The price of just about every major agricultural commodity has been absolutely soaring during the past year….

*The price of corn has doubled over the last six months.

 *The price of wheat has more than doubled over the past year.

*The price of soybeans is up about 50% since last June.

*The price of cotton has more than doubled over the past year.

*The commodity price of orange juice has doubled since 2009.

*The price of sugar is the highest it has been in 30 years.

Unfortunately, the production of food in most countries around the world is very highly dependent on oil, so as oil goes up in price this is going to make the food crisis even worse.

Hold on to your hats folks.

Also, as I have written about previously, the world is facing some very serious problems when it comes to water.  Due to the greed of the global elite, there is not nearly enough fresh water to go around.  The following are some very disturbing facts about the global water situation….

*Worldwide demand for fresh water tripled during the last century, and is now doubling every 21 years.

*According to USAID, one-third of all humans will face severe or chronic water shortages by the year 2025.

*Of the 60 million people added to the world’s cities every year, the vast majority of them live in impoverished slums and shanty-towns with no sanitation facilities whatsoever.

*It is estimated that 75 percent of India’s surface water is now contaminated by human and agricultural waste.

*Not only that, but according to a UN study on sanitation, far more people in India have access to a mobile phone than to a toilet.

*In northern China, the water table is dropping one meter per year due to overpumping.

These days, one of the trendy things to do is to call water “the oil of the 21st century”, but unfortunately that is not a completely inaccurate statement.  Fresh, clean water is something that we all need, but right now world supplies are getting tight.

Our politicians and the global elite could be doing something about this if they really wanted to, but right now they seem perfectly fine with what is happening.

On top of everything else, the sovereign debt crisis is worse than it has ever been before.

All of the major global central banks have been feverishly printing money in an attempt to “paper over” this crisis, but it is not going to work.

Most Americans don’t realize it, but right now the continent of Europe is a financial basket case.  Greece and Ireland would have imploded already if they had not been bailed out, and now Portugal is on the verge of collapse.  The interest rate on Portugal’s 10-year notes has now been above 7% for about 3 weeks, and most analysts believe that it is only a matter of time before they are forced to accept a bailout.

Sadly, if the entire global economy experiences a slowdown because of rising oil prices, we could see half a dozen European nations default on their debts if they are not bailed out.

For now the Germans seem fine with bailing out the weak sisters that are all around them, but that isn’t going to last forever.

A day or reckoning is coming for Europe, and when it arrives the reverberations are going to be felt all across the face of the earth.  The euro is on very shaky ground already, and whether or not it can survive the coming crisis is an open question.

Of course there are some very serious concerns about Asia as well.  The national debt of Japan is now well over 200% of GDP and nobody seems to have a solution for their problems.  Up to this point, Japan has been able to borrow massive amounts of money at extremely low interest rates from their own people, but that isn’t going to last forever either.

As I have written about so many times before, the biggest debt problem of all is the United States.  Barack Obama is projecting that the federal budget deficit for this fiscal year will be a new all-time record 1.65 trillion dollars.  It is expected that the total U.S. national debt will surpass the 15 trillion dollar mark by the end of the fiscal year.

Shouldn’t we have some sort of celebration when that happens?

15 trillion dollars is quite an achievement.

Most Americans cannot even conceive of a debt that large.  If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

But the United States is not alone.  The truth is that wherever you look, there is a sea of red ink covering the planet.

The current global financial system is entirely based on debt.  If the total amount of debt does not continually expand, the system will crash.  If somehow a way was found to keep this system going perpetually (which is impossible), the size of global debt would keep on increasing infinitely.

Now the World Economic Forum says that we need to grow the total amount of debt by another 100 trillion dollars over the next ten years to “support” the anticipated amount of “economic growth” around the world that they expect to see.

The entire global financial system is a gigantic Ponzi scheme.  It is designed to keep everyone enslaved to perpetual debt.  If at some point the debt spiral gets interrupted in some significant way, we are going to witness an economic disaster that is going to make what happened in 2008 look like a Sunday picnic.

The more research that one does on the current global economic situation, the more clear it becomes that we are absolutely doomed.

So people of earth you had better get ready.

An economic disaster is coming.

The Economic Collapse