January 25, 2012 in Debt Crisis
While our national media attempts to choose a Republican Standard Bearer against a Socialist Obama Regime, Greece’s civil unrest continues to escalate. After months of rioting and anarchy, a desperate Grecian government is about to force their sovereign bondholders to take a ‘Voluntary’ 70% haircut, ala General Motors, on Grecian Sovereign Debt.
Meanwhile, Standard & Poors, which analyses sovereign debt for financial risk, has downgraded France and eight other euro-zone countries’ Bond Ratings. Their downgrades on January, 13th have sparked renewed global worries about Europe’s ability to bail itself out of its deepening financial crisis.
Standard & Poor’s Ratings Services stripped triple-A ratings from France and Austria and downgraded seven others, including Spain, Italy and Portugal.
The downgrade to France, the European Unions (EU’s) largest economy, will make it difficult and more expensive for their bailout fund to help troubled states, because the fund’s own triple-A rating depends on those of its constituents, most of whom been downgraded. EU’s bailout fund is headed for another crisis in March
In 2010, Greece’s Debt to GDP % was 142.7, Italy 119, US 94.36, France 82.33, and Spain 60.12. In August 2011, The U.S. debt surpassed 100 percent of gross domestic product after the government’s debt ceiling was lifted.
In the meantime the World Bank on January 18th quietly downgraded the Global Growth Forecast while our national printed and cable media once again failed to publicize the report to the American public.
They downgraded the Global Growth Forecast from 3.6% to 2.5%. The US Growth Forecast was downgraded from 2.9% to 2.2% and the Eurozone from 1.8% to -0.3%. The Eurozone crisis will eventually spill over into the US economy. Hans Timmer, head of development projects at the World Bank said that, “This will be a very slow recovery and it will take many, many years before the damage done by the great recession and the damage done by the imbalances created in a boom period before the recession are undone.”
These economic tremors will have an effect on the US economy since we are the major contributor of funds to the International Monetary Fund (IMF) which has been supplying loans to the Eurozone countries like Greece, Italy and Spain in order to stem their possible sovereign defaults.
The slowdown in Europe will surely affect our exports which will further slow our economy and jobs. Other tremors are our enormous debt that consists of Government debt of $15T, Financial debt of $17T, Corporate debt of $11T and our Consumer debt of $14T for a total debt bubble of $57T.
Along with our debt burden is a demographics issue wherein we will begin to see a downward trend in aggregate spending as our population ages. That is to say as and our population between 50 and 60+ years of age increases while our population between 18 and 50 years of age decreases. Studies have shown that the 50+ age group tends to spend significantly less than the 18 to 50 age groups.
All of these factors portend for a very difficult US economy in 2012 and if we don’t relief in 2013, in the form of a new president and a new economic direction away from socialism, we will be well on the “Road to Serfdom.”
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