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Euro-zone Politicians Polishing the Brass on the Titanic

Politics / Eurozone Debt Crisis May 22, 2012 - 06:09 AM GMT

By: Graham_Summers


France and other, weaker EU members have begun pushing for “growth.” This in of itself reveals how clueless the political elite in the EU are (economic growth in Europe is synonymous with living beyond one’s means and/or living off of others… the very policies that have lead to the EU Crisis).

Indeed, this shift from focusing on austerity to growth is really just a switch from one side of a coin to the other… without actually addressing the fact that the coin itself has no value as a concept.

Let me explain.

Both growth and austerity are political hot buttons that fail to address the core issues plaguing the Euro-zone. Those core issues are:

1)   Age demographics, which courtesy of a welfare state translates into…

2)   Massive unfunded liabilities and debt overhang that stifles growth…

3)   And an unwillingness to innovate or pursue democratic capitalism

When political leaders talk about austerity today, they’re not even actually addressing real austerity. France, for instance, is balking at the prospect of submitting to more  “austerity measures” when it actually increased its spending by $62 billion from 2009-2011.

That’s austerity?

Indeed, the whole exercise becomes a total joke when you realize that as far back as 2004 France had unfunded liabilities (social programs, pensions, etc) equal to over 500% of its GDP. As Jagadeesh Gokhale of the Cato Institute notes, in order to meet these needs without increasing taxes, France would need to set aside nearly 10% of its GDP every year indefinitely.

Put another way… in order for France to meet its unfunded liabilities, it would have to start saving NOT spending beyond its means.

Speaking of which, spending beyond one’s means is precisely what EU leaders are referring to when they talk about “growth.” For the EU, economic growth is synonymous with spending money (especially if it’s someone else’s money), NOT economic innovation or organic growth from small business.

As I mentioned before, the “austerity” and “growth” to which EU leaders refer are simply two sides of the same coin: that of assuming that massive problems can be dealt with superficially. It’s akin to polishing the brass on the Titanic as it sinks: in the short term, you’re making a small difference, but in the big picture, you’re ignoring the very real, enormous problem you need to tackle.

Those enormous problems are a massive debt overhang… which cannot be dealt with by the ECB, Fed, or even the IMF at this point. The Fed has already openly admitted that it cannot perform more aggressive easing (it is an election year in the US after all). The ECB has expanded its balance sheet to the point that its own solvency is in question. And the IMF, which is essentially a US-backed entity, cannot get funds from the Obama administration during an election year.

That’s the real deal here. And it’s all happening at a time when EU sovereigns, corporations and banks need to roll over TRILLIONS of Euros in debt at the same time as they need to issue hundreds of billions of Euros in new debt.

On that note I fully believe that the EU will collapse before the end of the summer. So if you have not taken steps to prepare for the end of the EU (and its impact on the US and global banking system), you NEED TO DO SO NOW!

Those investors looking for actionable investment ideas could also consider our Private Wealth Advisory newsletter: a bi-weekly detailed investment advisory service that distills the most important geopolitical, economic, and financial developments in the markets into concise investment strategies for individual investors.

To learn more about Private Wealth Advisory and how it can help you navigate the markets successfully…

Click Here Now!!!

Graham Summers

Chief Market Strategist

Good Investing!

PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to and click on FREE REPORTS.

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2012 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Graham Summers Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


22 May 12, 20:35
Some Sinners Are Beyond Salvation

All problem sets do not have a solution. In mathematics, it is often possible to prove that a solution to a real problem does not exist, but in the real world, one often has to rely on his intuition and intelligence to come to an analogous conclusion. (I would be one of the first to admit that many individuals are incapable of following the above advice, e.g. Ben Bernanke).

None the less, the time often will come when the best (but painful) option is to let the old, battered, and relatively useless ship sink, and to build a new one the design of which is based on modern technology and lessons learned from the past.

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