Tag Archives: Debt
Market initially rally, but Slump Amid Spanish Debt Fears
After the conservative victory in the Greek election the markets rallied at the opening of trading. However, they soon began to fall again- worries about Spain’s economic position dominating trading.
Spain’s borrowing costs are now so high they are finding themselves locked out of the debt markets. This is despite a bailout of their banking system.
Read more at The Telegraph
US NATIONAL DEBT
US NATIONAL DEBT
A person is inclined to think, “I am not going to forward any more political e-mails.”
Then one like this comes along.. .. .. … .. .. !
A picture is worth 1,000 words!!
SUICIDE OF A SUPERPOWER
If you think the economic problems in the world are only European – then think again! American debt is colossal. Our debt stands at $15.566 Trillion, and is now over 100% of GDP. With such massive debt, you’d think we’d be trying to balance the books? Last year our budget deficit was $1.3 trillion, and this year is projected to fall to $901 billion.
That means, as a nation, we owe more than we are getting in in revenue. Obama’s spending policies for a second term have no plan to create a balanced budget, instead current projections would see national debt hit $20 trillion by 2016. Debt has risen more under Obama than Bush. We have seen how the socialist policies, popular in Europe, are just as popular here. But could we see the same things that are happening in Greece, here in America? Socialism will bankrupt us. You cannot keep promising people free everything on borrowed money.
If America falls it will be Suicide of a Superpower.
Greece: Chaotic Mess Results from the Country’s Election
The two leading parties in Greece have seen their support plummet and are unable to form a coalition, with 70% of the of the electorate voting for parties who are against the EU/IMF bailout.
The recession in Greece has seen the Greek GDP shrink by 13% in two years, many believe the harshness of the EU imposed austerity is to blame for the depth of the recession.
Furthermore unemployment is sitting at 21% and climbing, with official poverty levels in Greece at 27.7%.
The Greek people are desperate for change, but some economists have warned an exit from the Euro would result in an 80% reduction in the Greek standard of living.
Greece is a comparatively young democracy, and was ruled by a military junta until 1974.
The far left and far right are growing in popular support.
For a nation hurting and feeling humiliated these are tense times.
If the politicians cannot form a workable coalition another election in June will be required.
The uncertainty, along with the French election vote, has resulted in turmoil in the European markets, and has destabilised the situation further in Portugal and Spain.
Also in Europe in the past week the Dutch and Romanian governments collapsed with their politicians unable to agree to the necessary austerity measures.
If Greece pull out of the EU/IMF bail out and default on their debts, the domino affect would cause an economic tsunami across the globe.
With the Greek economy the size of Minnesota, that may sink the rest of Europe and by consequence America.
China’s Own Debt Mountain
As China chides the West for our mountains of debt, they have an inconvenient truth of their own. Decades ago China began to sell sovereign bonds to the West. However, for the last 60 years they have refused to pay bondholders back, not even the interest!
Britain managed to broker a deal with China as part of their agreement over Hong Kong, which ensured China pay back their debts to the UK, however the rest has remained unpaid. Consequently China owes $750 billion to America, and several trillion dollars globally! This ought to be termed as a “selective default”, however the ratings agency choses to look at it differently.
The consequences of this fudge of the rules means China continues to pay nothing on these debts, but demands the rest of the world to pay theirs.
America pays her debts. She asks China to do likewise.
America May Save the Euro
Some new and more radical solutions are beginning to be discussed about how to save the Euro from collapse. One of these solutions is for the IMF to provide funding for Italy and Spain if they need help. They are thought to be planning an $800bn bailout package, but the deal would mean the European bailout fund would have to underwrite the first 30% of any defaulted debt, therefore they still need the €1 trillion in the bank (which still poses the same problem of where to get that from), and they also suggest the bail out fund begin to issue bonds. This would mean many other countries other than Eurozone ones, helping bailout the Eurozone. America contributes 17% to the IMF, consequently, America would send Italy $136 billion under this deal!
Another solution is that the US Fed, buys up the European countries bonds. These are currently all but unsellable. By doing so, the borrowing costs of Spain and Italy would fall overnight, and the US Fed would in effect take the place of lender of last resort, a role the European Central Bank has thus far refused to fill. However, there are two problems with this plan: firstly it could hurt the dollar, and secondly inflation, as it would have the same effect as printing money. The fear of inflation is one of the issues which has hampered action being taken. Germany has an unhappy history with inflation, and the German people and government are wary of anything that may trigger it again. But, many respected economists believe the main threat facing Europe is hyper-deflation.
However, neither of these solutions deal with the underling cause of the crisis. That of a single currency operating with a 30% misalignment between north and south; only the exit of either the wealthy northern states, or the exit of the poorer PIIGS states can solve that. Perhaps some US imposed inflation will make this prospect seem more palatable to the German’s?
With the European stale-mate still very much evident, it looks more likely that the rest of the world will have to take action in order to avoid a global depression, worse than that of the 1930’s financial crash.
European Bailout Fund- Oct ’11 updated
Monday, 31 October 2011 updated to June 2012
Last October we ran a mission into Europe. This was a crucial time as European Union leaders were about to hold a key summit to deal with the ongoing debt crisis.
The week leading up to the summit the negative headlines continued, yet the stock markets across Europe rose each day, resulting in the highest market gains in 11 months.
The summit was also very fruitful, a way forward was presented, including: a hair-cut for Greek debt, a €1 trillion bail-out fund, and a deal to re-capitalise the banks.
However, within days of the mantle leaving Europe the optimism evaporated and the deal struck seemed to fall apart as Greece called for a referendum, and investors backed off from contributing to the bailout fund. One partner watching the news, and unaware that the Europe mission had ended and the mantle had returned to America said, “I knew DP was out of Europe, it all just fell apart suddenly, and the hope left.”
Since then, we have seen a change of government in France, Spain closer to financial ruin, and threats of a breakdown in the pact made during Sarkosy’s Presidency with member nations over the fiscal pact.
However, now the mantle is back in Europe, decisions have been made to enable financial support to Spain, and Greece is continuing to work through her financial difficulties, with the new French president working with EU member nations for a way through the debt crisis.
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Video link to cartoon: general financial explanation of debt crisis
European Bailout Fund- Oct ’11
This October we ran a mission into Europe. This was a crucial time as European Union leaders were about to hold a key summit to deal with the ongoing debt crisis.
The week leading up to the summit the negative headlines continued, yet the stock markets across Europe rose each day, resulting in the highest market gains in 11 months.
The summit was also very fruitful, a way forward was presented, including: a hair-cut for Greek debt, a €1 trillion bail-out fund, and a deal to re-capitalise the banks.
However, within days of the mantle leaving Europe the optimism evaporated and the deal struck seemed to fall apart as Greece called for a referendum, and investors backed off from contributing to the bailout fund. One partner watching the news, and unaware that the Europe mission had ended and the mantle had returned to America said, “I knew DP was out of Europe, it all just fell apart suddenly, and the hope left.” A sustained presence in a region is essential, Support Prophet TV so we can have a sustained presence in these regions.