Europe's Economic Crisis Is Not Over

Why The Euro Crisis Isn't Over -- BRIAN M. CARNEY, Wall Street Journal

The economist who dared to predict Europe's mess, and was fired for it, says there is much more pain to come.

Seventeen years ago, Bernard Connolly foretold the misery that awaited the European Union. Given that he was an instrumental figure in the EU bureaucracy and publicly expressed his doubts in a book called "The Rotten Heart of Europe," he was promptly fired. Mr. Connolly takes no pleasure now in having seen his prediction come true. And he takes no comfort in the view, prevalent in many quarters, that the EU has passed through the worst of its crisis and is on the cusp of revival.

As far as Mr. Connolly is concerned, Europe's heart is still rotting away.

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My Comment: As I have said many times in the past .... tax and spend, followed by tax, borrow, and spend .... the outcome is never going to be good. In Europe's case .... many of these troubled countries have not even started doing the structural adjustments that would put their budgets into some semblance of sanity. My prediction .... and it is not a hard one to make .... Europe's economic crisis will continue and will get worse.

With Sequestration Fast Approaching Everyone In Washington Goes On Vacation

Senate Democrats unveiled a bill to replace the sequester in part with new taxes on millionaires, which Republicans oppose. Pete Souza/Official White House Photo

Automatic Cuts Are Getting A Big Yawn From Washington -- Washington Post

As deadlines go, the March 1 sequester lacks punch. Nobody’s taxes will go up; the U.S. Treasury won’t run out of cash. Government offices won’t immediately turn out the lights and lock the doors. No federal worker will be furloughed for at least 30 days.

So Washington felt little need to cancel the Presidents’ Day break. On Friday, President Obama flew to Florida for a long weekend of golf. And Congress left town for nine days, with scant hope of averting deep cuts to the Pentagon and other agencies in the short time remaining when lawmakers return.

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My Comment: Regular readers of this blog know that I have nothing but contempt for both the Republican and Democrat parties in Washington .... and I am not even an American. You would think that piling trillions of dollars of debt, debasing the currency to fund entitlement programs that are not sustainable, getting involved in stupid wars, widespread corruption, lies, and more lies ....you would think that people would rebel .... or at least vote these bums out .... but alas no. You would think that at least the media would do what the media is suppose to do .... bring truth to power .... but alas no again. In fact in the eyes of the main stream media the new boogey man in Washington is this guy who has no power .... not the politicians who have all the power and who are slowly destroying what was once a great country.

Sighhhhh .....

I know that I should not get upset .... but I am repeating history. My nationality is Russian and in the mid 1980s I voiced the same thing over there (Soviet Union). That the political rot and the fiscal mismanagement would wreck the country unless radical change was adopted. No one believed me and for my reward I was sent off to China to drum up business with their state firms. Talk about being exiled. But everything has worked out and I should not complain. (I am a Canadian citizen now).

I survived. Russia has survived .... and so will the U.S..

Sequestration will happen. There will be budget chaos. President Obama will rush in with a plan. It will be adopted. And the bread and circus show will continue for another day.

What's My Take On This Week's U.S. Fiscal Cliff Deal

America Could Still Go Over The Cliff — And Take The Rest Of Us With It -- Simon Heffer, Dialy Mail

After America postponed its jump off the fiscal cliff in the small hours of Tuesday night, world stock markets soared. Anyone listening to the BBC yesterday with its headlines praising Barack Obama would think something quite profound had changed in the world’s greatest — if battered — economy. However, it has not.

Intractable problems — chief among them chronic over-spending and weak consumer demand — have still not been solved.

The tackling of those issues has merely been postponed until the end of next month, when America’s legally enforceable ‘debt ceiling’ will probably be reached.

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My Comment: Two other must read commentaries on America's debt crisis are the following ....

The Real Country-Killer in 2013 -- Jonathon Moseley, American Thinker
Brace For An Avalanche of Unfunded Debt -- Mort Zuckerman, US News and World Report

Update: At least someone else agrees with me.

WNU Editor: Why I Am 100% Sure That Massive Cuts In The U.S. Defense Budget Are Going To Occur

US Budget For Dummies

From my inbox, submitted without comment.

* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000

Let’s now remove 8 zeros and pretend it’s a household budget:

* Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts so far: $38.50

Make sense now?

WNU Editor: From Hot Air

My Comment: The sad part is that even if the US defense budget is cut 100% .... the U.S. debt is still climbing at an unsustainable rate.

U.S. Debt Ratio Is Now The Same As Italy’s

Saudi Bank Warning: U.S. Debt Ratio Same As Italy’s -- World Tribune

ABU DHABI — Saudi Arabia has warned the financial community of a decline of the U.S. dollar.

Saudi Arabia’s National Commercial Bank said the debt burden of the United States has reached the same ratio of Italy, deemed a default risk. In a report, the Jedda-based bank warned that the downgrade of the U.S. credit rating from triple A status would reduce energy demand and prices, a
move expected to harm the Saudi kingdom.

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My Comment: The Saudis have every reason to be concerned .... they are holding about $492 billion in U.S. debt .... and as for the Chinese who hold a trillion plus .... they are very very concerned. Zero Hedge has done a bit more analysis on American government's addiction to debt ... it has become one of my go-to-place for U.S. economic and business trends.

The Washington Consensus Right Now Is That The U.S. Is Going Off The Fiscal Cliff

Fiscal Cliff Deal Increasingly Unlikely -- Politico

Nearly all the major players in the fiscal cliff negotiations are starting to agree on one thing: A deal is virtually impossible before the New Year.

Unlike the bank bailout in 2008, the tax deal in 2010 and the debt ceiling in 2011, the Senate almost certainly won’t swoop in and help sidestep a potential economic calamity, senior officials in both parties predicted on Wednesday.

With the country teetering on this fiscal cliff of deep spending cuts and sharp tax hikes, the philosophical differences, the shortened timetable and the political dynamics appear to be insurmountable hurdles for a bipartisan deal by New Year’s Day.

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My Comment: The U.S. Senate has not passed a budget for the past 3+ years .... I doubt that they are going to be successful in the next 3 days. Sequestration appears to now be inevitable .... and for the Pentagon/defense budget/defense contractors who need to plan months (if not years) for their programs/procurements/and policy goals .... everything that has been done in the past few years is now on the verge of being thrown out of the window in the next few days.

Who am I to blame for this debacle .... I cannot blame the President or the Democrats for this mess .... I know what they are and what they want (i.e. a smaller defense budget, more taxes, more entitlements, a greater role for government, etc.) .... the group that I am blaming are the Republicans. They signed up to sequestration because they believed that the Democrats would compromise on their principles .... they are now learning that they will not. The question that is now being asked is .... will the Republicans compromise on theirs .... I believe that they will .... but only in the next month or two before the impact of sequestration really starts to hit the economy and the pocketbooks of American taxpayers.

And the sad part of this debacle is that none of the plans offer any real solutions to arresting America's addiction to debt and deficit financing .... thereby guaranteeing the next crisis (and solutions) will be even worse.

U.S. Will Hit Debt Limit On Monday

The Outstanding U.S. Public Debt as of 26 Dec 2012 at 10:07:21 PM GMT

U.S. To Hit Debt Limit Monday -- FOX News

The U.S. Treasury on Wednesday announced the first in a possible series of emergency steps to push back the day when the government will exceed its legal borrowing authority as imposed by the U.S. Congress.

The Treasury said on Dec. 28 it would suspend issuance of State and Local Government Series securities, known as "slugs", which are special low-interest Treasury securities offered to state and local governments to temporarily invest proceeds from municipal bond sales.

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WNU Editor: The U.S. national debt (in real time) can be viewed here.

This Is How Banana Republics Think And Operate

Could Two Platinum Coins Solve The Debt-Ceiling Crisis? -- Washington Post

If President Obama wants to avoid an economic calamity next year, he could always show up at a press conference bearing two shiny platinum coins, worth… $1 trillion apiece.

Okay, that sounds utterly insane. But ever since last year, some economists and legal scholars have suggested that the “platinum coin option” is one way to defuse a crisis if Congress can’t or won’t lift the debt ceiling soon. At least in theory.

The U.S. government is, after all, facing a real problem. The Treasury Department will hit its $16.4 trillion borrowing limit by next February at the latest. Unless Congress reaches an agreement to raise that borrowing limit, the government will no longer be able to borrow enough money to pay all its bills.

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My Comment: If this is how wealth is created, why stop at two .... why not mint a thousand .... why not hundred thousand .... better still .... why not a million.

US Plunge Off 'Fiscal Cliff' Is Likely

US Plunge Off 'Fiscal Cliff' Is Likely, Say Debt Gurus Simpson And Bowles -- Christian Science Monitor

Former chairs of Obama's debt commission, Alan Simpson (R) and Erskine Bowles (D), said at the Monitor breakfast Wednesday they see just a one-third likelihood that the White House and congressional Republicans will reach a deal by year's end to avert the fiscal cliff.

Fresh from a meeting with President Obama and en route to talk with House Speaker John Boehner, the former co-chairmen of the bipartisan Simpson-Bowles debt commission say it's more likely than not that the United State will fall off the "fiscal cliff" at year's end.

There's only about a one-third possibility that Congress and the White House will reach a deal to avert some $600 billion in automatic tax hikes and mandatory spending cuts over 10 years – an outcome that would be "devastating to the economy," says Erskine Bowles, the Democratic half of the Simpson-Bowles partnership, speaking to reporters at the Monitor breakfast in Washington on Nov. 28.

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My Comment: What's my take .... they are right .... we are going to go off a cliff .... but it will not happen now. Washington cannot control it's spending, and the public that voted for this are content as long as the checks come in. My prediction .... in the next two months tax increases and cuts in the defense budget will occur, but the real problem of reigning in government spending and debt will not be addressed. In short .... America's fiscal problems will be kicked down the road to be addressed at a later time.

More Evidence That America's Debt Crisis Is Getting Worse

US Credit Rating Cut by Egan-Jones ... Again -- CNBC

Ratings firm Egan-Jones cut its credit rating on the U.S. government to "AA-" from "AA," citing its opinion that quantitative easing from the Federal Reserve would hurt the U.S. economy and the country's credit quality.

The Fed on Thursday said it would pump $40 billion into the U.S. economy each month until it saw a sustained upturn in the weak jobs market. (Read more: Fed's 'QE Infinity' — Four Things That Could Go Wrong)

In its downgrade, the firm said that issuing more currency and depressing interest rates through purchasing mortgage-backed securities does little to raise the U.S.'s real gross domestic product, but reduces the value of the dollar.

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My Comment: Another sign that the U.S. is heading towards a fiscal cliff .... and fast.

Moody's Warns That U.S. Credit Rating To Be Cut Again

Moody's Investor Services offices in New York. (Reuters)

Moody's Warns Of U.S. Credit Rating Cut If Debt Problems Continue -- L.A. Times

WASHINGTON -- Moody's Investor Services warned Tuesday that it likely would downgrade the U.S. AAA credit rating if government officials don't deal with the nation's debt problems.

The credit rating firm said negotiations between Congress and the White House on the nation's 2013 budget, and whether they will reduce the high ratio of debt to gross domestic product, will be key to maintaining its top credit rating.

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More News On Moody's Issuing A Warning That The U.S. Credit Rating Is To Be Downgraded Again

Moody's warns could lower US triple-A rating -- AFP
Moody’s Says U.S. Faces Aaa Cut Without Budget Deal in 2013 -- Bloomberg
Moody's set to downgrade US without budget deal -- Boston.com/AP
Moody's Cautions of Possible U.S. Downgrade in 2013 -- Wall Street Journal
Moody's says looking for downward U.S. debt trajectory -- Reuters
Moody's: Congress must reach fiscal deal to avert downgrade -- The Hill
Moody’s Warns of US Debt Downgrade -- ABC News
Moody's Says U.S. Has Until End Of 2013 To Save AAA Rating -- Forbes

My Comment: This approaching fiscal cliff reminds me of the intelligence warnings before 9/11 .... everyone heard the warnings .... but choose to ignore them.

Hannan: US Debt Is Everyone's Problem

My Comment: A must see video if the U.S. debt crisis concerns you.

Italy's PM Warns Of Europe's Disintegration

Italian Prime Minister Mario Monti. RIA Novosti

Debt Crisis Threatens To Break Up Europe -- The Telegraph

Tensions within the eurozone over how to resolve the debt crisis are turning countries against each other and threatening to rip Europe apart, Italian Prime Minister Mario Monti has warned.

Resentment in Italy is growing against Germany, the European Union and even German chancellor Angela Merkel herself, he said, adding that “the pressures already bear the traits of a psychological break-up of Europe”.

Mr Monti told German news magazine Der Spiegel that he was “concerned” about the deepening divisions and said governments “must work hard to contain it”.

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Update #1: Monti warns euro crisis threatens EU as a whole -- AP
Update #2: Italy's Monti warns Europe of 'psychological break-up' -- BBC

My Comment: I call this realization from the Italian PM as a "DUH!!!!" moment.

Euro Crisis -- News Updates May 14, 2012

Would the euro go up in flames if Greece is forced to leave? BBC

Global Financial Markets In Turmoil As Government-Less Greece Teeters On Brink Of Crashing Out Of Europe -- Daily Mail

* Growing pessimism over future of single currency in current form
* Greek political paralysis as talks continue at 7.30pm to form government
* Communists vow to take to the streets as fears of civil war grow
* Ministers say armed kalashnikov-wielding gangs could take over
* Worsening crisis and thousands take to streets for mass protests in Spain
* Merkel's Christian Democrats 'crushed' in 'bellwether' regional elections
* German chancellor raises possibility of Greek exit for first time
* Greek bank shares plunge by 7%, as European stock markets also fall

Global financial markets were today plunged into chaos as Greece continued to teeter on the brink of crashing out of the eurozone.

European markets are suffering from the uncertainty over the future of the single currency, with Britain's FTSE-100 falling to a four-month low, plummeting 2.13 per cent to 5,456.61.

France's CAC 40 fell 2.23 per cent to 3,060; while Germany's Dax is 1.97 per cent down at 6,450. In the U.S., a lack of confidence has seen the Dow Jones fall 0.54 per cent 12,751.

At one point the American market was 1 per cent down, and further losses are expected, as experts say Greece's exit from the eurozone 'has become more likely in the past few hours'.

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More News On the Euro Crisis

Debt crisis: live -- The Telegraph
Eurozone crisis live: Markets slide as Greek euro exit looms -- The Guardian
Fears rise of new Europe crisis -- news.com.au
Greek Crisis Hurts Markets -- New York Times
Secondary Sources: Euro Crisis, Long-Term Unemployment, Greek Exit - -Wall Street Journal
Could the euro survive a Greek exit? -- Robert Peston, BBC
Euro crisis: The European maze -- Gavin Hewitt, BBC
The euro crisis: The unwinding -- The Economist

Spanish Debt Concerns Rise

International Monetary Fund (IMF) Managing Director Christine Lagarde, seen here on April 12, said that she is hoping to make “real progress” at this week’s meetings. Joshua Roberts/Bloomberg

Euro Area Seeks Bigger IMF War Chest on Spanish Concerns -- Bloomberg

European officials travel to Washington this week seeking a bigger global war chest to combat the debt crisis as Spain’s government battles to quell renewed market turmoil over its finances.

Three weeks after European leaders unveiled emergency euro- area funding exceeding the symbolic $1 trillion mark, concerns about Spain’s position have ratcheted the nation’s borrowing costs to the highest levels this year. Crisis-fighting resources will dominate talks at the International Monetary Fund’s spring meeting in Washington from April 20-22.

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My Comment: Countries like Spain have such a massive debt obligation over their heads that it will be next to impossible for them to pay it off. But to keep the crisis from happening and escalating NOW .... Europe is trying its best to postpone and minimize this inevitable debt catastrophe.

Euro Emergency Talks On The Verge Of Collapse

UK's Huge New Euro Bailout: As Rescue Talks Collapse In Chaos, Our Taxpayers Face ANOTHER Massive Bill To Prop Up Single Currency -- Daily Mail

* Efforts to thrash out a rescue deal in chaos after meeting with finance ministers cancelled
* Cameron will say a bigger bailout fund is necessary to avoid economic catastrophe
* Britain has already forked out around £12billion to bail out Ireland, Greece and Portugal

Britain was facing a new multi-billion-pound bill to prop up the euro last night as the single currency teetered on the brink of collapse.

Efforts by France and Germany to thrash out a rescue deal descended into chaos as a meeting of EU finance ministers scheduled for today was cancelled at the 11th hour because of lack of progress.

More than £18billion was wiped off the value of shares in London in just 20 minutes when EU officials also warned that a separate make-or-break leaders’ summit today in Brussels would also fail to end the crisis.

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Update: EU crisis talks in limbo after crucial summit is cancelled -- The Telegraph

My Comment: Now I know what the Romans felt Rome was burning and Nero was "playing his violin".

Europe's Sovereign Debt Crisis Worsens -- News Roundup

Europe Scrambling To Complete Debt-Relief Plan -- Voice of America

With 24 hours to go before another summit, European leaders were scrambling Tuesday to complete a plan to resolve the continent's governmental debt contagion.

The outline of a package of reforms is emerging, but details have yet to be set. The plan calls for European banks to forgive billions of dollars of debt for Greece and sharply increase their own cash reserves. At the same time, the size of the continent's bailout fund would be boosted to assist other debt-ridden countries in the future.

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More News On Europe's Debt Crisis

Debt crisis: live -- The Telegraph
Debt Crisis: live -- The Guardian
Europe: Grimmer by the minute -- CNN
Europe crisis plan talks enter final stretch -- AP
Euro rescue plan may be delayed again -- L.A. Times
Italian coalition talks hit deadlock -- Financial Times
Europe is now leveraging for a catastrophe -- Wolfgang Münchau, Financial Times
Europe's Stupid Plan -- John Carney, CNBC
No quick solution to Europe's debt crisis -- Henry Chu, L.A. Times
'Unknown territory' for Europe if summit fails: France -- MSN News
Three Key Political Hurdles to the Eurozone — Outside of The Summit -- Wall Street Journal
EU Crisis Roadmap: Key Milestones -- Wall Street Journal

The Financial Mess That Is Greece Continues

Greece Handed €8bn Aid Package Lifeline But Euro Concerns Remain -- The Telegraph

Greece was handed a lifeline on Friday night after international lenders finally released an €8bn (£6.95bn) aid package for the beleaguered country, kicking off a crucial weekend for the future of the eurozone.

Although the agreement will allow Athens to avoid imminent default, a report leaked at the Brussels summit on Friday night suggested the terms of the second Greek bail-out would have to be ripped up in order to stabilise the country.

The report – prepared for the troika of the IMF, European Central Bank and European Commission – suggested Greece’s economy has deteriorated to such an extent that lenders would have to find €252bn in loans by the end of the decade.

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More News On Europe's/Greece's Debt Crisis

Funds Approved for Greece but Leaders Remain Divided -- New York Times
Eurozone Closer to Cutting Greece's Huge Debts -- ABC News/AP
Greece Gets New Batch of Bailout Loans -- Time/AP
Greece may need 60 percent bond writedown; EU at odds -- Yahoo News/Reuters
Eurozone crisis: live blog -- Financial Times

My Comment: What gets my blood boiling is when I read stories like this one.

The Euro Zone Has 8 Days To Fix It's Debt Crisis (Or Else)

G20 Tells Euro Zone To Fix Debt Crisis In Eight Days -- Reuters

(Reuters) - The world's leading economies pressed Europe on Saturday to act decisively within eight days to resolve the euro zone's sovereign debt crisis which is endangering the world economy.

In unusually direct language, finance ministers and central bankers of the Group of 20 major economies said they expected an October 23 European Union summit to "decisively address the current challenges through a comprehensive plan".

French Finance Minister Francois Baroin, who chaired the meeting, said Berlin and Paris, the leading euro zone powers, were well on the way to agreeing a plan to reduce Greece's debt, stop contagion and protect Europe's banks.

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My Comment: I am not confident that a resolution will be found for the simple reason that you cannot change a nation's political/social culture overnight. When the Greek Prime Minister has to go on his knees to beg to his fellow Greeks that in order to avert a "catastrophe" sacrifices will need to be done ... and they refuse .... you know that this house of cards will eventually fall down. The big question then is .... when will this house of cards fall down? My prediction .... if the richer nations do not pony up some cash in the next week or two, then the defaults will happen sooner than what many experts are saying .... like in a few weeks.

Global Trade Is At Risk

Time to get serious: France's President Sarkozy, US President Obama, German Chancellor Merkel and Britain's Prime Minister David Cameron Photo: REUTERS

An Entire System Of Global Trade Is At Risk -- The Telegraph

Next month’s G20 summit must go beyond the usual rhetoric. Confidence in the eurozone’s banking system has to be restored through recapitalisation of its banks.

Sir Mervyn King, the Governor of the Bank of England, this week called the current financial crisis “the most serious… since the 1930s, if ever”, in justification for a further £75 billion of “quantitative easing”. Since Sir Mervyn cited the chaos of the inter-war years, it seems appropriate to quote Winston Churchill: “Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusions of counsel, until the emergency comes, until self-preservation strikes its jarring gong – these are the features that constitute the endless repetition of history.”

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My Comment: Should be surprised that we are repeating 2008 .... no. Governments have an addiction to spend .... especially to their own special interest groups. In a time when budgets should have been tightened up and spending controlled .... governments continued business as normal without realizing that business cannot return to normal until our debts are under control. Sighhh .... governments and our banking institutions should have tightened up .... but in the end .... expect this for Europe ... .and this for the U.S. .... and global trade will be the poorer for it.

Update: IMF advisor: 'In The Absence Of A Credible Plan We Will Have A Global Financial Meltdown In Two To Three Weeks' -- American Thinker