Great Depression Online Archive Issue:

More Collapsed than a Habsburg's Jaw

Great Depression Online
Long Beach, CA
November 30, 2010

Inside This Issue You Will Discover…

*** Ireland Brought to Its Knees
*** Euro Breakup?
*** More Collapsed than a Habsburg’s Jaw
*** And More

Ireland Brought to Its Knees

Ireland took a hit square on the chin over the weekend.  Rather than default on their loans they took the bailout money from the European Union and the International Monetary Fund. 

“Ireland will receive 67.5 billion euros from the European Union and International Monetary Fund and provide 17.5 billion euros from its own pension reserves,” reported Bloomberg.  Of course, Ireland was happy about it…

“Ireland has been brought ‘to its knees’ by the government and bankers, Jack O’Connor, head of Ireland’s umbrella organization for labor unions, told the crowd.  ‘Several generations of Irish men and women’ will have to foot the bill, he said.”

What a shame for the Celts.  If they’d defaulted on their debt the needed corrections to their economy would have taken place.  They’d have been forced to purge the rot from their financial system.  In the very short term it would have been painful.  But before long a healthy, nimble economy would have emerged and everyone would have been the better for it.

~~~~~~How To Prepare?~~~~~~

The shocking 1990 collapse of the Japanese Market.  The extraordinary U.S. economic boom of the ‘90s and early 2000s.  The devastating global recession that began in 2008.  These impacted everyone’s lives, investments, and fortunes.  The signs of their arrival were visible years and years in advance.  And yet…Almost No One Predicted Them.

The mainstream media didn’t.  The top economists didn’t.  The great financial advisers didn’t.  But One Man Did.

What’s coming Next?  When will it happen?  What should you do to Prepare for it?

Click Here for the Answers 

~~~~~~~~~~~~~~~~~~~~~~~~~

Instead the Irish will be propping up institutions that deserve to die.  They’ll be paying back the EU and IMF for years to come…and 20-years from now their economy will still be mired in slow growth.  Just ask Japan or Mexico or anyone else who has attempted to solve the debt problem by piling on more debt.

And now that Ireland has been bailed out…who will be next and can the euro survive more bailouts?

Euro Breakup?

First it was Greece.  Now it is Ireland.  Next it will be Portugal.  But the real big upcoming test for the euro is Spain.

Here’s why…

Spain’s GDP, based on 2009 GDP, is $1.4 trillion.  This amounts to nearly double the GDP of Greece, Ireland, and Portugal combined.  Additionally, Spain’s GDP amounts to nearly 12-percent of the entire Eurozone’s GDP.  A bailout of that magnitude could certainly undermine the euro…maybe it could even lead to its end…

“Analysts and investors are starting to wonder openly about what would happen in the grim scenario of a breakup in the 16-country euro, in a sign that the region’s debt crisis is moving into a new phase,” reported DOW Jones Newswires.

“Up to now, a collapse in the currency project has widely been seen as so unlikely that few have given the matter much thought.  And it remains only a slim possibility.

“But as Greece receives financial aid and Ireland has requested [received] it, and speculation starts to build over Portugal and even Spain, financial-market insiders are starting to mull how much further this crisis can run, and whether the currency’s structure can take the strain.”

Would a Spanish bailout be the end of the euro?  We may soon find out…

More Collapsed than a Habsburg’s Jaw

Last Friday, as the Irish bailout was being hammered out, fear crept into the Spanish credit market.  Spanish bond yield spreads over German bunds hit a new record high of 2.61 percent.  If the yields keep rising Spain could eventually lose access to credit.  In other words, they’d have no way to fund their deficit…and they’d need a bailout lest they go broke.

Here at the GDO we believe it’s just a matter of time before Spain gets a bailout.  Why not?  If the Hellenes and Celts were granted EU and IMF salvation, shouldn’t the Iberians be granted deliverance too?

Regardless, of whether Spain wants a bailout or not there may be no choice.  In fact, there may be no choice for the whole Eurozone for that matter…

‘“We believe there is currently no provision in documentation in the event of a break-up of the euro.  If one did occur, corporates would likely have to revert to their original currency at a pre-determined rate,’ said Societe Generale in a note to clients.”

‘“If the euro goes, the whole European banking system--including the banking systems of the core nations--would be nearly bust,’ said Arturo De Frias Marques at Evolution Securities.

“If Europe reverted to local currencies like the Spanish peseta and the Italian lira, devaluations would follow immediately, and the scale of loan and investment write-offs would render the whole European banking system completely insolvent, De Frias Marques said.”

So for now the euro hangs in the balance of a Spanish ledger book.  Who knows?  Perhaps there are some lessons from the 18th century to be relearned from Spain’s century long decline.  If so, the euro’s future is more collapsed than a Habsburg’s jaw.

There is “absolutely” no chance Spain will seek a bailout from the European Union, said Spanish Prime Minister Jose Rodriguez Zapatero on Friday.

The Prime Minister obviously needs better advisors.  Clearly no one’s explained to him that Spain forfeited the autonomy to make that decision years ago.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  Europe’s in disarray.  And what they’ll soon find is that bailouts don’t solve a darn thing.  Similarly, the USA is relearning this same lesson from the 1930s.  It seems things could spin out of orbit at a moment’s notice.  Now, more than ever, you need to know what’s coming next and how to prepare for it.

Find out here

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