Posted on 12/02/2011 9:02:26 AM PST by SeekAndFind
This is the worst-case scenario from Europe, and it just might come true: Italy defaults on its debts. Every major Italian bank collapses. Recession grips the eurozone. Sovereign defaults and bank failures ripple across the Continent. Saddled with bad loans to nations and lenders in Europe, American banks hemorrhage cash. Credit freezes in the United States. Multinational companies, unable to raise money, curb U.S. investment and hiring. Wall Street demands, but fails to get, new bailouts. The entire developed world plummets into recession and, quite possibly, depression.
This, in contrast, is the placid warning that President Obama gave Americans about the threat: “If Europe is contracting,” he said on Monday, “then it’s much more difficult for us to create good jobs here at home.” There’s still a chance that Europeans, through some combination of fiscal and monetary action, can stop the crisis before it shatters the feeble U.S. recovery. But the worst case is so much worse than Obama’s description, and Washington has failed to prepare voters for the possibility. “The [potential] shock we’re talking about is of very large magnitude,” says Viral Acharya, a New York University professor who studies financial risk extensively. “If you’re just having an Armageddon coming your way, [America’s] buffers may not be adequate.”
The eurozone’s struggles are already hurting the U.S. recovery. Stocks have fallen, and exports to the European Union—the world’s largest economy—are dropping as the Continent slides into recession. In the best case, the pain inflicted on the United States basically stops there. Europeans marshal the political will to bail out Italy and Spain, and they wall off Greece from the financial system at large. Lending slows but doesn’t stop. The European recession proves comparatively mild, and America avoids one.
But the situation could worsen quickly for the United States. The biggest risk is a massive credit freeze. Loans from European banks account for one-fifth to one-quarter of the American lending market, Acharya says, and loans from those banks would disappear fast if they begin tumbling under bad sovereign debts. American banks would likely pull back on lending, too. Consumers and businesses would curb spending. “The precipitating event for the global financial crisis and the Great Recession was the bankruptcy of a single, relatively small broker-dealer, Lehman Brothers. The bankruptcy of a nation as large as Italy would be many times more severe,” says Karl Smith, an economist at the University of North Carolina who cowrites the popular economics blog Modeled Behavior. “In theory, there is no limit to how bad it could get.”
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Neither a borrower nor lender be.
I’m so sick of hearing this doomsday crap. I just know that Obama’s kids will be alright they will succeed, lets me rest easy at night
Ludwig Von Mises
Sadly, politicians always choose option #2.
The American economy has been brought down
by Frank, Dodd and Pelosi using Fanny and Freddie.
When he mentioned not wanting his kids living behind gated walls separate from everyone else who is poor,
he revealed exactly what all elitists, including himself, actually want.
I have that quotation on my FR homepage. Politicians should have it tatooed on their foreheads in reverse so they can read it every time they look in a mirror.
I took the big “rally” the other day as a huge SELL indicator, and got out of my stock market holdings.
Now, I just have to figure out when to buy back in right before the currency gets reset.
Now I know where all of the Global Warming alarmist bloggers have moved on to.
This world doomsday stuff is becoming the far right’s version of the earth coming to an end.
***“If Europe is contracting,” he said on Monday, “then it’s much more difficult for us to create good jobs here at home.***
Sure Barry. As if you give a rats @$$ about the creation of any American jobs, much less good ones.
“This world doomsday stuff is becoming the far right’s version of the earth coming to an end.”
###
Oh the “Far Right” stuff, huh? Telling.
So what then do you forsee as the likely fiscal endpoint of a daily accelerating, historically unprecedented, 15 trillion dollar debt, in a country that is making no moves toward curtailing policies that allow it to spend 43% more than is earned?
Take a look @ Paladin's comment vis-a-vis debt: pure common sense as told throughout the ages. So why does mankind continually violate this prime directive? I mean, anyone can model the exponential progression of P=P+I (where principal equals principle + debt), calculate the doubling period (3% takes 24 periods) and determine when it's 11:59 (ie the n-1 last doubling period).
(For those that believe that debt can be amortized over the life of a loan, please note that it's only been accomplished once: the post WWII generation. For the entire history of recorded civilization, money lenders always end up holding the collateral after the inevitable default.)
So why do it? Why did Jackson consider his greatest accomplishment as defeating the banks? Why did it take 80 years to re-create our third CB (the Fed)? Dig a little deeper and you'll soon realize that there's a lot going on that many people simply cannot bring themselves to accept.
There is only one candidate with the right response to this.
You all know it, even if you hate the fact.
With an awful lot of austerity by the younger generations, who will respond with a ‘nose to the grindstone’ approach that will make us proud. Just like the Depression babies of the past, the Millenials (the vast majority of which are looking down their noses at the OWS crowd and the Boomers who did this to them) will lower their consumerism and save a lot of money. So that when Social Security and Medicare are not there for them, they will be prepared.
They will be entrepreneurial beyond anything we have seen before, will rout China for global economic supremacy, and one day they will be talked about with mythic tones by their children and grandchildren.
They will reinvent true conservative values to accommodate their more libertarian beliefs to match their Hayak-ian and Von Mises-ian economic principles.
I, for one, hope to be around to see them triumph.
If you’re referring to the former obstetrician, he’s great except for one thing.
“Aside from that, Mrs. Lincoln, how was the play?”
Wasn’t Obama elected because “we” wanted to be just like Europe?
I agree. And he was giving a coded message to his elite pals.
“Get ready for the big $hi+ storm.”
It’s an eternal push and pull, that takes place over a span of time longer than a man’s life or memory.
they don't care about millions unemployed, as long as they can talk endlessly and text endlessly on some new gadget....
and as long as we have millions going to "college" for shallow education, we know we have a problem...when math, engineering,medicine,physics, etc become the CHIC majors, and not "sociolgy" "psychology", etc...
I see my adult children becoming a little better at living within budget...I hope it continues...
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