Quantum Pranx


Continuing Crisis in the Eurozone

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by Bud Conrad
From Casey’s Daily Despatch
Originally posted Jan 12, 2011

IN CASTING ABOUT FOR INSIGHTS INTO HOW the ongoing global financial crisis may unfold, I am coming across an increasing number of stories about inflation in emerging countries, along with the persistent problems being caused by the overhang of sovereign debt in developed countries.

One article worth your time is authored by Ambrose Evans-Pritchard writing in London’s Telegraph on the latest problems in the eurozone having to do with Portugal. In his article, he points out that when interest rates rise to 7%, it is hard to keep the country from moving into default and bailout.

The purpose of the hundreds of billions of dollars in bailouts arranged by the European Central Bank has been to save the banks of Germany and France, not to help Portugal or its citizens. These bailouts will continue until the European Union is bankrupt and sold out to Asia, particularly China and Japan, as they are the ones with the money to buy cheap assets after the crash.

This accelerating crisis in Europe does not leave the rest of the world safer, because it leads to contagion. And those looking for a safe harbor in the U.S. will increasingly find their options limited. That’s because the huge U.S. deficits and spending are even worse than in the eurozone, where at least some attempt is being made to introduce a semblance of austerity. By contrast, the U.S. is unswerving in its headlong rush to spend itself into dollar collapse.

The extent of the problems in Europe, as well as elsewhere, can be seen in the rising cost of insuring debt against default. In the chart here, you can see the rising costs of default coverage on an index made up of the sovereign debt of 19 Western European countries.

The bottom line is that I agree with Pritchard’s view that the crisis in the eurozone is far from over. Here’s the link to his article.


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