This is the final update from the currency war front for this year. For my many readers in Europe, I am sad to say it will not be considered a good year by any stretch. However, as we have been warning in this series of articles, 2011 looks more like the year the Euro was assassinated. As we commented in previous articles, the banksters mode of operation now is to break sovereign funds and they are doing a great job at achieving those goals and they are doing it right out in the open in front of us all. Here’s how it works. First you force the sovereign to accept severe austerity programs, including raiding pension funds using the IMF and ECB, then you require them to accept “bailout money” and then you use the rating agencies(who you own and control) to downgrade the sovereign’s bonds. Think I am wrong? Then read the following with what I just said in mind.
Source: The Economic Collapse
What in the world is happening over in Europe? Well, it is actually quite simple. We are witnessing the slow motion collapse of the euro and of the European financial system. At this point, many analysts are convinced that a full-blown financial implosion in Europe has become inevitable. Ireland, Spain, Portugal, Italy, France and Belgium are all drowning in an ocean of unsustainable debt. Meanwhile, Germany and the few other “healthy” members of the EU continue to try to keep all of the balls in the air by bailing everyone out. But can Germany keep bailing the rest of the EU out indefinitely? Are the German people going to continue to be willing to hand out gigantic sacks of cash to fix the problems of other EU nations? The Irish were just bailed out, but their problems are far from over. There are rumors that Greece will soon need another bailout. Spain, Portugal, Italy and France have all entered crisis territory. At the same time, there are a whole host of nations in eastern Europe that are also on the verge of financial collapse. So is there any hope that a major sovereign debt crisis can be averted at this point?
One would like to think that there is always hope, but each month things just seem to keep getting worse. Confidence in European government debt continues to plummet. The yield on 10-year Irish bonds is up to 8.97%. The yield on 10-year Greek bonds is up to an astounding 12.01%. The cost of insuring French debt hit a new record high on December 20th.
Bond ratings all over Europe are being slashed or are being threatened with being slashed. For example, Moody’s Investors Service recently cut Ireland’s bond rating by five levels. Now there is talk that Spain, Belgium and even France could soon all have their debt significantly downgraded as well. But if the borrowing costs for these troubled nations keep going up, that is just going to add to their financial problems and swell their budget deficits. In turn, larger budget deficits will cause investors to lose even more confidence.
So how far are we away from a major crisis point? Professor Willem Buiter, the chief economist at Citibank, is warning that quite a few EU nations could financially collapse in the next few months if they are not quickly bailed out….
“The market is not going to wait until March for the EU authorities to get their act together. We could have several sovereign states and banks going under. They are being far too casual.”
Many analysts are even calling for some of these troubled nations to stop using the euro for a while so that they can recover. In fact, Andrew Bosomworth, the head of portfolio management for Pimco in Europe says that Greece, Ireland and Portugal must all quit the euro at least for a little while if they expect to survive….
“Greece, Ireland and Portugal cannot get back on their feet without either their own currency or large transfer payments.”
Sadly, most Americans don’t realize just how bad the situation in Europe is becoming. This is truly a historic crisis that is unfolding, just as we predicted it would and just in the manner we predicted it would.
However, since the euro seems at this point to be a “exploit accompli”, the next target is the US Dollar and not necessarily treasury bonds at first. There are so many state and local governments on the verge of bankruptcy. This makes the municipal bond market the next “soft” target. Indeed, a bloodbath in the municipal bond market has already started.
The reason for delay the assault on treasury bonds is the effects that could happen that would careen out of the control of the banksters. For example, if rates on U.S. government debt eventually hit 8 or 12 percent it will literally be financial Armageddon in this country. The U.S. government has piled up the biggest mountain of debt in the history of the world, and if we continue piling up debt at the pace that we are, then it will only be a matter of time before the IMF is demanding that we implement our own “austerity measures”.
Many readers recently have commented that I may be over reacting and in fact there are positive things happening in both the economies of the US and Europe. I do not deny these facts. However, they are simply dwarfed in scale by these facts. This blog simply aggregates the facts and from those FACTS draws conclusion as to what might happen next. I do not gain any pleasure or profit for my efforts, I am simply reporting in detail and opining what may happen next. I really don’t like what I see happening next. I believe we may be very close to sound the alarm for general quarters, if you get my drift.
See you next year.