Because of the pressing nature of this great global debt calamity, we have declared this week “Crisis Week” here at Money and Markets. I’ve asked Mike Larson to report on how we got here, what’s next and what you should be doing to protect yourself and profit. Be sure to read Mike’s report in its entirety. — Martin |
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Europe is in tatters. Its governments are barely clinging to power. Its economy is crippled and bleeding. Its banks are fighting for their very lives.
The cost in human terms is horrendous. Millions of jobs have been vaporized. Family businesses — many of them centuries old — have been destroyed. The people have been pushed to the limits of their endurance. The daily news is filled with images of riots and bloodshed in the streets.
The entire continent is now in the clutches of the most savage, remorseless killer in the financial firmament: Unpayable sovereign debt is threatening the very survival of the union.
And now, that same killer is also stalking us; right here, in the United States of America. Barring a major miracle, we, too will soon be living the same nightmare. It is only a matter of time.
We have sown the wind; we are about to reap the whirlwind.
For the next several years, this great government debt crisis will be the #1 consideration in every financial decision you will make. And so, each day this week in this space, we will examine the six major blunders that brought us to the brink of this abyss — both in Europe and here in the States.
More importantly, I will offer you time-tested strategies to help you protect and grow your wealth as this crisis unfolds.
I strongly urge you to pay especially close attention to each one of these Money and Markets issues this week. Save them. Print them. Share them with your friends and family.
They could very well make the difference between financial disaster and success for you.
This Great European Debt Crisis
Began Like All Crises Do: Quietly …
When the global economy was booming in the 1990s, politicians across Europe simply began giving their people more: Bigger salaries. Longer paid holidays. Larger pensions. Greater government benefits.
As a result, budget deficits exploded throughout the euro zone …
* Greece’s deficit-to-GDP ratio surged from 5.2 percent to 10.5 percent between 2005 and 2010 …
* Portugal’s deficit-to-GDP ratio deepened from 5.9 percent to 9.1 percent …
* Ireland swung from a budget surplus of 1.6 percent to a whopping deficit-to-GDP ratio of 32.4 percent …
* Spain swung from a 1 percent surplus to a 9.2 percent deficit …
*Even AAA-rated France, which investors are now starting to worry about, is sinking deeper into a budgetary hole. Its deficit-to-GDP ratio ballooned from 2.9 percent in 2005 to 7 percent last year.
Think That’s Insane?
You’re Right — and We’ve Spent Even More!
In 2007, Washington spent $1.06 for every one dollar in revenue it took in.
In 2008, that ratio climbed to $1.18 for every $1.
In 2009, The U.S. government spent $1.67 for every dollar in revenues.
In 2010, it spent $1.60 for every $1 it had.
And this year, the Congressional Budget Office says we’re on track to spend $1.63 for every $1 of revenue.
Like Greece, Ireland, Spain, Portugal, Italy and other European nations, we have an out-of-control spending addiction in this country. And the numbers are getting uglier year after year.
Regardless of who’s in the White House … regardless of who controls Congress … our leaders inevitably find ways to explode government spending every single year.
Worse, there is zero sign we’re going to get off this road to destruction. None!
Look at the supposed debt ceiling deal that our craven legislators just worked out. They claim it will cut the deficit by up to $2.3 trillion over the next ten years. But that’s just smoke and mirrors.
The deal doesn’t cut spending at all. It only slows the increase in spending.
It doesn’t even pretend to address the biggest budget beasts of all — Social Security and Medicare. And even discretionary spending — the kind of spending we can actually control without too much effort — isn’t going to shrink.
Case in point: The bill gives Congress discretionary spending authority of $1.043 trillion in 2012 … $1.047 trillion in 2013 … and $1.066 trillion in 2014.
By 2021, discretionary spending is projected to hit $1.234 trillion — 18 percent MORE than next year!
What about the “Super Committee?” The one that’s supposedly going to come up with some kind of plan to cut spending once and for all? It’s going to be a spectacular failure, just like every other committee before it!
That’s because it’s packed with six Republicans and six Democrats who are just going to parrot the same party lines that their parties’ leaders did in the debt ceiling debate … the one that ended with the issue being punted to the committee in the first place!
Bottom line: Out-of-control spending got Europe into this mess in the first place.
Now, it has drawn the United States into this crisis as well. Our leaders are destroying our nation by spending too much money!
As a result, we’ve already lost our “AAA” credit rating at S&P, and it’s only a matter of time before the other ratings agencies follow suit.
Time to Pay the Piper
Europe’s governments spent far too much and are now suffering the horrific consequences.
The United States spent far more — but we are just beginning to pay the piper.
Everything you see happening now in Greece, Ireland, Italy, Spain and Portugal …
> Governments pushed to the brink of default …
> Massive cuts in entitlement spending …
> Economic hardship …
> Plunging stocks …
> Skyrocketing unemployment …
> Riots in the streets …
Is little more than a sneak preview of the financial catastrophe that’s now stalking the United States.
More importantly, each of these “six steps to financial doomsday” we’ll examine here in Money and Markets this week is pushing us to an historic, world-changing event that will soon alter all of our lives forever.
So be sure to stay tuned!
Best wishes,
Mike Larson
{ 4 comments… read them below or add one }
We have one cutting advantage over the euro piigs. We have an overbloated massive war machine we can pare down.
BRING OUR TROOPS HOME!
If it helps stop the unnecessary NATO wars and get the purported ET quarantine of our planet to prevent the export of hostilities into space lifted so that we can start importing medical and industrial technology for life extension, aging regression, the elimination of poverty and pollution and normalized interstellar space transportation, it will be a good thing, and we can all live longer, healthier, happier lives.
NATO aggression is the problem, containing and correcting it so that we can move ahead with extraterrestrial integration with compatible human and other ETs looks like the solution to me.
Uh, we could also increase taxes… Since you usually have to pay for the cake you wish to eat.
Mike,
One major problem to overcome regarding the runaway US govt. spending is the influence the military industrial complex has over our politians. We, Americans spend over $800 BILLION (and growing each year) on military and in turn unauthorized conflicts. It is a shame that most Americans are too busy and are distracted from this real issue. We should be asking ourselves why does our military either stationed on the ready and/or conduct war in Iraq, Afghanistan, Pakistan, Libya, Yemen, South Korea, Poland, Bosnia, Tiawan?
At a critical moment in our history where our govt. needs to reduce spending by $1.2 trillion, it should be an American priority to reduce military spending back to a target of $300Billion/year. We also should demand that our poloitians eliminate corporate welfare that allows for offshore operation to evade taxes and other loopholes that destroy US manufacturing jobs.
One note on reducing military spending. Our country does not have to be the world’s enforcer/defender. Our country’s foriegn policy once was one of non intevention and now we need to remember that this policy is very different from an isolationist policy.
You and all the people at Money and Markets should keep up your efforts to get the message out that the US govt is broke and the ponzi scheme called deriviative / fractional banking must be reformed through the reenactment of Glass-Steagall Act.
God Bless America