The Global Economic Death Spiral Has Begun

Greece is just the beginning of the collapse and despite all the assurances in the news media for the last 1 1/2 years that Greece's problems were being solved, and all the run ups in the stock markets with those assurances as is happening in the markets now, Greece will fall. So will Portugal, Ireland, Italy and Spain for they are all insolvent. England is also insolvent and it too will fall. Many of Europe's and the U.S's biggest banks will need new bailouts for they are all interlinked in the huge magnitude of financing they conduct and without those bailouts or government guarantees, a credit crunch is coming, as happened in 2008-09.

The Euro Zone is appealing to Germany, France and to China for gargantuan bailouts but the Germans don't have the resources for such a bailout and the German people would never allow it, knowing they would have to bailout a group of nations. France is no pillar of financial strength, its banks have huge European exposure and their credit ratings are already being sharply downgraded. As the industrial world's economies decline, so will China's manufacturing boom and China's economy will also be impacted by a domestic real estate bubble.

Meanwhile, the U.S., by far the biggest debtor nation in the world, has bought time because some panicked investors seeking "safety" are buying Treasury Bills. But the U.S. has no economic policy, its job market and home foreclosures are disasters growing worse, its government and trade deficits are mounting and its biggest bank, the Bank of America is reeling and will layoff 30,000 people. In addition to all of its corporate bailouts, the U.S. had two huge stimulus programs. Some say the bailouts and stimulus programs prevented another Great Depression, while others argue they failed to rescue the global economy. But in any case the bailouts and stimulus were extremely expensive and the U.S. and other nations didn't have the money to conduct them. They wound up printing and borrowing the money, hence the debt crisis of today, which has left Washington in gridlock as to what to do next.

The President's proposed "jobs program" is just more stimulus and the Democrats and Republicans can't agree on that. But while they dither, the U.S. economy is rapidly falling. According to the U.S. Census Bureau, average family income has fallen to 1996 levels and the average man earns what he did in 1978, adjusted for inflation. And 22% of America's children now live below the poverty line. In fact the number of U.S. poor has jumped to 46.2 million people, the worst since the Census Bureau began tracking those numbers in 1959.

In another sign of how desperate the situation is becoming, on Thursday (9/15/11), the U.S. Fed, the Bank of England, the Bank of Japan and the Swiss National Bank all rushed U.S. dollar deposits to panicked European banks so they would continue to loan money, rather than start a credit freeze. This desperate approach was last used during the 2008-09 global financial crisis, the worst since the Great Depression.

So yes, the death spiral has already begun and the economies as we've known them will crash and burn. But do take heart. This is a natural cycle, repeated many times over the centuries and out of the ashes a rebirth always takes place, a Renaissance. In this case, hopefully a rebirth without all the U.S.'s wars and its military industrial complex behind those wars, which have drained so much of America's financial resources, its moral integrity and its compassion for humanity.

Dick
To learn more, please see "This Time Is Different: Eight Centuries of Financial Folly," a 2009 book by Carmen Reinhart and Kenneth Rogoff. "Census 15.1% of all Americans live in poverty," the Daily Breeze http://www.dailybreeze.com/latestnews/ci_18887429, "Income Slides to 1996 Levels," The Wall Street Journal http://online.wsj.com/article/SB10001424053111904265504576568543968213896.html, "Europe Lending Woes Deepen," The Wall Street Journal http://online.wsj.com/article/SB10001424053111904491704576570913474242974.html,  "Economy Clips Factories: Growth Prospects Shrink for U.S. Manufacturers Whose Profits Powered the Recovery," The Wall Street Journal http://online.wsj.com/article/SB10001424053111904491704576570900742148500.html and "Central Banks Pour Dollars Into Europe," The Wall Street Journal http://online.wsj.com/article/SB10001424053111904060604576572442555810356.html