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Possible Reasons For Economic Collapse In Europe In 2012

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22 Reasons for a possible economic collapse in Europe next year are outling by theeconomiccollapseblog. The main points are listed below but I recommend reading the full article to find out their sources.

#1 Germany could rescue the rest of Europe, but that would take an unprecedented financial commitment, and the German people do not have the stomach for that.

#2 The United States could rescue Europe, but the Obama administration knows that it would be really tough to sell that to the American people during an election season. 

#3 Right now, banks all over Europe are in deleveraging mode as they attempt to meet new capital-adequacy requirements by next June.

#4 European banks are overloaded with “toxic assets” that they are desperate to get rid of.

#5 Government austerity programs are now being implemented all over Europe.  But government austerity programs can have very negative economic effects.

#6 The amount of debt owed by some of these European nations is so large that it is difficult to comprehend.  For example, Greece, Portugal, Ireland, Italy and Spain owe the rest of the world about 3 trillion euros combined.

#7 Europe was able to bail out Greece and Ireland, but there is no way that Italy will be able to be rescued if they require a full-blown bailout.

#8 An Italian default may be closer than most people think. 

#9 European nations other than just the “PIIGS” are getting into an increasing amount of trouble.  For example, S&P recently slashed the credit rating of Belgium to AA.

#10 Credit downgrades are coming fast and furious all over Europe now. 

#11 The financial collapse of Hungary didn’t make many headlines in the United States, but it should have.  Moody’s has cut the credit rating of Hungarian debt to junk status, and Hungary has now submitted a formal request to the EU and the IMF for a bailout.

#12 Even faith in German debt seems to be wavering. Last week, Germany had “one of its worst bond auctions ever“.

#13 German banks are also starting to show signs of weakness.  The other day, Moody’s downgraded the ratings of 10 major German banks.

#14 As the Telegraph recently reported, the British government is now making plans based on the assumption that a collapse of the euro is only “just a matter of time”….

#15 The EFSF was supposed to help bring some stability to the situation, but the truth is that the EFSF is already a bad joke.  It has been reported that the EFSF has already been forced to buy up huge numbers of its own bonds.

#16 Unfortunately, it looks like a run on the banks has already begun in Europe.

#17 Confidence in European banks has been absolutely shattered and virtually nobody wants to lend them money right now.

#18 There are dozens of major European banks that are in danger of failing.  The reality is that most major European banks are leveraged to the hilt and are massively exposed to sovereign debt. 

#19 According to the New York Times, the economy of the EU is already projected to shrink slightly next year, and this doesn’t even take into account what is going to happen in the event of a total financial collapse.

#20 There are already signs that the European economy is seriously slowing down. 

#21 Panic and fear are everywhere in Europe right now.  The European Commission’s index of consumer confidence has declined for five months in a row.

#22 European leaders are really busy fighting with each other and a true consensus on how to solve the current problems seems way off at the moment. 

 

 

 

 

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PIMCOs View on Oil Prices if Iran Attacked

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PIMCO has given its views on oil prices it Iran was to be attacked. The chances of a move on Iran increases by the day so the article today in ZeroHedge is very relevant. Four senarios are outlined as follows:

4 scenarios presented by PIMCO here they are: “i) Scenario 1: Exports minimally effected. Concerns would drive initial price response; Oil could spike initially to $130 to $140 per barrel and then settle in a higher range, around $120 to $125; ii) Scenario 2: Iranian exports cut off for one month. In this case, we would expect prices could reach previous all-time highs of $145/bbl or even higher depending on issues with shipping; iii) Scenario 3: Iranian exports are lost for half a year. We think oil prices could probably rally and average $150 for the six months, with notable spikes above that level; iv) Scenario 4: Greater loss of production from around the region, either through subsequent Iranian response or due to lack of ability to move oil through Straits of Hormuz. This is the Armageddon scenario in which oil prices could soar, significantly constraining global growth. Forecasting prices in the prior scenarios is dangerous enough. So, we won’t even begin to forecast a cap or target price in this final Doomsday scenario.” Needless to say, even the modest Scenario 1 is enough to collapse global economic growth by several percentage points to the point where not even coordinated global printing will do much.

European Redemption Pact

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An interesting solution to the eurozone crisis as discussed in The Economist. A European Redemption Pact which was proposed by Germanys economic eggheads, the Council of Economic Experts.

This scheme would place the debt, in excess of 60% of GDP, of all euro-zone governments not already in IMF rescue plans into a jointly guaranteed fund that would be paid off over 25 years. Modelled in part on the federal government’s assumption of the debt of America’s states begun by Alexander Hamilton in 1790, the fund would provide joint liability for these debts under strict conditions. These would require euro-zone countries to introduce debt brakes into their constitutions, like the one Germany and Spain already have; give priority to paying off the mutualised bonds; set aside a specific tax revenue to do so; and pledge foreign-exchange reserves as collateral.

At its peak, the redemption pact would be huge: the joint liability would amount to €2.3 trillion. But it would technically be temporary. For all these safeguards, Germany’s government has so far poured cold water on the idea. But time is running out. And the scale of the impending catastrophe demands radical answers.

The full article is quite long but is worth reading.

 

 

So Who Prints Faster? ECB or FED

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Anwser: the ECB.

Strange but true. The ECB prints monetizes more than the FED.

in the past week the ECB’s SMP program announced it purchased €8.581 billion in PIIGS bonds in the open market, which brings total notional purchases to €209.1 billion over the life of the program since inception on May 14, 2010. However, due to interim maturities, about €5.5 billion have matured from the total holdings, which means that on a net basis, total purchases have only now passed €200 billion for the first time, and are now at EUR 203.5 billion. More importantly, since the resumption of the SMP program in August, the ECB has bought €131 billion in PIIGS bonds, or about $176 billion. This works out to just under $60 billion per month (and no, it is not sterilized when the sterilizing banks exist solely courtesy to ECB funding as noted before) and is just modestly less than what the Fed monetized on a monthly basis at its peak QE, and about 30% more than what the Fed does now during Operation Twist! ($45 billion monthly at last check) So… Who was it that said the ECB needs to print more?

Source: ZeroHedge

Italian Gold to be Stolen

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Max Keiser’s has previously predicted the loss of Italy of its gold. In a clip below of his show they discuss the new moves of  the EU Commission, which has proposed using Italy’s gold to back bonds. The Financial Times has reported as follows:

Italy has the world’s third-biggest reserves, of 2,451.8 tonnes, worth almost €100bn. If that was used as collateral for the first loss portion of a bond, say the first 20 per cent, it could support issuance of €500bn. Coincidentally, Italy needs €498bn to repay maturing debt between now and 2014.

Prepare for riots in euro collapse, Foreign Office warns

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😦 British embassies in the eurozone have been told to draw up plans to help British expats through the collapse of the single currency, amid new fears for Italy and Spain.

According to The Telegraph,

British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.

Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

“It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told the Daily Telegraph. 

Diplomats have also been told to prepare to help tens of thousands of British citizens in eurozone countries with the consequences of a financial collapse that would leave them unable to access bank accounts or even withdraw cash.

If eurozone governments defaulted on their debts, the European banks that hold many of their bonds would risk collapse.

Some analysts say the shock waves of such an event would risk the collapse of the entire financial system, leaving banks unable to return money to retail depositors and destroying companies dependent on bank credit.

The Financial Services Authority this week issued a public warning to British banks to bolster their contingency plans for the break-up of the single currency.

Some economists believe that at worst, the outright collapse of the euro could reduce GDP in its member-states by up to half and trigger mass unemployment.

 

You couldn’t even make this shit up if you tried. Of course a collapse of the Euro zone would have massive repercussions across the water in the US. Many US banks are exposed to european sovereign debt and bank debts through CDSs.

It sounds like a 1930s Great Depression is a strong possibility and might be worth making provisions. Of course the sheep are always the last to know. There is a condition called “Normalcy Bias” which we all tend to suffer from. The challenge is to break out of this way of thinking and find your own information. I hope this site in some way helps fill the gaps.

 

Stock Markets – You Decide

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Nice chart from ZeroHedge. Speaks for itself, enough said.

 

 

 

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