The article below is long but very interesting. It warns of coming Tsunami in USA. If USA is affected, can we in Canada escape?

It should warm the hearts of left leaning socialists. Guess Greece has exposed the vulnerabilities of socialist system. Obama will certainly ride in to oblivion but would drag USA along with it.

On side note, it would be interesting to note how it would affect India. Unless MMS comes up with some brilliant idea to bring back dollars stashed in Swiss bank, India would be in hot water too. Indian foreign exchange reserves are inadequate especially considering the amount of "hot money" invested in the stock market and reality.

http://www.minyanville.com/businessmarkets/articles/greece-debt-europe-print-money-uk/5/5/2010/id/28134?camp=syndication&medium=portals&from=msn

Europe's Problems Come Knockin' on America's Door
By Leo Isaak May 05, 2010 3:50 pm
To save our country, we must implement stark and serious changes.

As I wrote a couple of weeks ago, in Greece's Role in the Economic Domino Theory, Greece was just the first domino. And really, this isn't about Greece per se, although its poor attitudes have a lot to do with it. It's about all debt, and this entire planet is replete with massive amounts of debt from one end to the other that will never be able to be repaid.

As we continue to see how this mess plays out, it's becoming more and more obvious to me that the debt bogeyman is going from closet to closet scaring the you-know-what out of everyone. Greece has effectively collapsed, Portugal and Spain are currently being taken out back and shot, and everyone's next target seems to be the UK. Oh yeah, Italy and Ireland are still out there.

This will be interesting, of course, as the UK has the ability to print money. As much as this is a positive, it's equally a negative as there's no ultimate benefit to debasing one's currency. Debasement has never been an effective long-term strategy.

I've often heard the argument that those who can print money are never in danger of default. While that may be technically true, the damage resultant from massive amounts of money printing is just as debilitating.

Let's just say the Treasury prints all of the money it needs to make debt payments, fund payroll and entitlements, etc. What is the end result of that? Obviously, the currency will fall and purchasing power will be destroyed. With a currency in decline, that in turn impacts the ability of the government to sell debt in the open market because buyers will demand either a higher coupon or a discount to par to make up for the depreciation in currency. Of course, there is also the chance that the offering is rejected. Then what? Then the printing presses really get cranked up and cries of Weimar begin to make their way around the audience.

Think it can't happen? Let's put a face with the name and go to England. The UK has a mountain of debt around 70% of GDP (not counting entitlements), massive deficits of more than 12% to GDP, huge unfunded entitlement liabilities, high taxes, and a floundering economy. (Sound familiar?) As with Greece and Spain, concerned investors and traders begin to buy up CDS's, which in turn spooks forex traders who sell the Pound Sterling. The falling Pound causes concerns about the UK and its economy, which erodes confidence both internally and externally. That erosion leads to citizens becoming concerned and spending less money. This leads back to the Exchequer cutting interest rates or leading a quantitative easing program to stimulate the economy, which creates more debt, which leads to more money printing, and on and on.

The point is that adding more debt never got anyone out of debt. It just delays the inevitable of having to make more than one spends, and once traders turn their sights on the US, we could see our problems here ratchet up rather quickly. This is exactly what successful traders/mangers like Bill Fleckenstein, Marc Faber, Jim Rogers, and many others are talking about when they talk about inflation being inevitable here.

"Ask not what your country can do for you, but what you can do for your country." -- JFK

No one likes austerity, but as the inimitable Margaret Thatcher was fond of saying, "The problem with socialism is that eventually you run out of other people's money." We are seeing this come to fruition before our very eyes. Reckless spending on the backs of a few can never last as Atlas will, at some point, shrug. Socialism's incredible failures throughout history make me wonder how anyone can continue to promote such ideals as they are nothing short of debilitating. In theory, it all sounds and feels good, but in practice it's an unmitigated disaster; not the utopia supporters proclaim it to be.

Unfortunately, socialism is now what we are seeing in America -- make no mistake about it. For some reason that I can't comprehend, our leaders (for some time now) have decided that being like France, and to a lesser extent Greece, is the right choice, while the people have remained relatively quiet. Exploding entitlements, higher taxes, more regulation, and socialized risk are a surefire recipe for disaster. These are the same ingredients that have led to the indigestion that we are now seeing erupt in Greece, Portugal, and Spain. They are also rampant in France, Japan, and England. All of these countries have similar problems to the US with the distinction that the US has liabilities that far outweigh these other countries.

"Pain is weakness leaving the body." -- Daniel R. Evans

Pain is inevitable -- we (citizens/voters/taxpayers) just have to decide what kind of pain we want to endure. By that I mean we have two primary choices. The first is to continue down our current path. We already know this is untenable. The second is that we make the difficult decisions that will negatively impact many Americans in an attempt to save the rest of the country. This includes major cuts in entitlement spending and promises, massive reductions, if not the complete elimination of all foreign aid, reductions in "defense" outlays around the world from Europe to Asia, selling off the massive amount of property owned by the federal government, removing government's influence in the student loan and housing markets so that prices in those industries correct appropriately, and changing our tax system to something far simpler like a flat tax or my preference, the Fair Tax (both will require the repeal of the 16th Amendment).

So, the choice is ours. Which path do we wish to take? Riots led by union groups who desire what no one else gets, ballooning debt and deficits that will lead to higher interest rates, and the eventual destruction of the dollar? Or do we take our medicine now by implementing stark and serious changes in this country in order to save it? Because, frankly, it really is that serious. The only path to redemption is through self-reliance.

A little knowing of the Financial Happenings in this world, is never too dangerous. But it could be totally misleading when we have to draw a conclusion from all of the economic catastrophe created within its own borders that is bankrupting each one of the Nations, world over. Besides all of the turmoil it is facing with in, some of the nations are not self sufficient and have no or Nil natural resources or industries to sustain themselves in this current economic world. What does it mean? They are living beyond their means and hence they are broke. That is in simple and plain English.

GREECE:
They had a snap election last year. And they promised a lot of things. I don't understand Greek. So it mattered very little.They had to keep their spending under a 3% level of the GDP. But they were four times that amount prior to that. And they wanted to pare it down to half. That is when the austerity drive hit the fan.

Japan saw it twenty years or so ago. Brazil went through it some time back. Iceland went bankrupt in 2008. Also a lot of the African Nations too. They all are on the brink of collapse. The U.S. has seen it, but did not do much to get out of it, or how to accomplish it.An effort is being made and every one hopes it is in the right direction. Dubai also got into the crunch. Abu Dhabi helped Dubai make it through the night. (During its darkest hours.) Now a few more will follow. Portugal, Ireland, Italy, Greece and Spain are High on the list and you can see them in their 'langoots' and I don't mean the ones around their necks, but the bare bottoms. Who is NEXT??!!

Now the European Union has come forward to bail them(Greece) out with 160 Billion EUROS so that they can bob above the water level. But that does not mean that the debt instruments that they have to redeem or to re-issue will ever get to see the time of the day. Currently all of the Bonds that they have to redeem are worth nothing and if they go to the open Market to float another it will ever be bought by the public? These are the factors that its Government is facing. That is why they have been down graded to zip. Will this 160 Billion Band-Aid work??!!

The Domino Effect has taken root and if the Big G8 or the G20 don't get together and take some action, then we will see a collapse of the whole world economy. When Greece's Economy which is about 2% of that of the European Economy has opened up its eyes and we now see the tail wagging the dog. It has become a poster child for the whole of Europe and the world. Now, I see the Canary in the Coal Mine. What it about to occur is imminent and no one likes it there and it has sent chills around whole of Europe.

Now they have the thought of increasing the VAT to 21%. Want to cut the Government Pay packs by 8% and cuts to bonuses by 30%, that is for the Government Employees. Increase Sin Taxes. The prices of all of the commodities will soar. People will feel the inflation. It is not just in one sector. It will be pronounced and felt all over the Europe. They blame has been shifted to the Banking Industry for not watching the flood gates. They will now face a BANK TAX??!! And what is that??!! Their life styles will change and people will resolve to stay indoors and weather out the storm. The belt tightening has begun and we will also see a lot of the Paper currencies coming out. The Euro that was at $1.60 level just Two years ago will be now $1.25 tomorrow. And it will hit $1.17 by the time summer is over.

This foregoing is my summation from the articles published by TD Securities, Bank of America and the Federal Reserve Bank of Kansas City and my personal research in Forex Markets.

In some Economies such as in India, there are two such items floating side by side One that is bringing in revenues to the Government coffers and the other one that does not, which flourishes in the underground. Since they are running side by side and is balancing the money flow, the whole of India is Happy. Some time in the near future (May be hundred years from now) when people realize that there are merits in one system or both, the switch will occur and people will cruise on happily ever after. It is not a very small amount in rupees, but such a large amount and its values cannot be deciphered by any one of us sitting 10,000 miles away. And those who know its existence also know who created it. That is a conundrum that they are facing. Others might call it by a different name.

Look out, and I also feel like a lobster in a pot with salt water and the Canadian Government has just put the heat on us. I am getting cooked, but slowly, and the pain will hit slowly but surely and then the lights go out.

Freddie.

There is now real fear that contagion of Greece will spread to the entire world through freezing of inter bank landing as happened in USA. FED saved the situation but in case of European Union countries, the individual country can not print currency and there is no equivalent of Fed to save the day.

U.K. with its very high deficit and Spain and Portugal are likely to be the next victims. These are the countries which pillaged and looted their colonies for years. Second World War bankrupted these countries. Barring U.K., the rest of the countries basically depend on agriculture and tourism. They were so busy looting the colonies that they never developed industries to support. Now their borrowing binge has ended, they will have to undergo the same pain that they inflicted on their colonies. I guess the only way they can survive is to sell their soul to China. It will be interesting to watch the fast developing situation.

Greeks live in the past. They are lazy. They still talk abt Alexander the great, his conquers, etc. They have lost touch with the real world. What do we expect?

KM

Double dip recession fears are real. The nightmare scenario is unfolding fast and would likely engulf the entire world like crisis in USA did. The European people are lazy and some of them have been used to live off the hard work and savings of the other countries. Euro exchange value has been very high compared to the productivity and GDP of these nations. What I learnt in economics was that exchange value depends upon the GDP of the countries. Since these countries had high GDP because of the already high exchange rate of Euro, they enjoyed the labor of other countries. I still wonder how Euro can be at Rs. 65. Is it they are productive by 65 times? How does a bank clerk in Canada be more productive by 50 times than a clerk in India? How is that a TTC ticket collector sleeping on the job can add $80,000 to Canada’s GDP while an Indian ticket collector adds $2,500 (Re. 100,000) to Indian GDP?

Anyway, China has changed the entire game and though not acknowledged as number one super power officially, business world knows that. (Do not misunderstand me. I do not like this AT ALL) The PIGS countries have no resources, no innovative spirit and socialist economies where the lazy idiots are hooked to the state taking care of them in all respects. Now these states have been exposed and nobody is willing to lend them. These states have used up all their wealth looted from the “third world” countries of Asia, Latin America and Africa. They can not reconcile that now they can no longer afford luxuries by rearing Sheep and Goats. Competing in increasingly integrated world economy requires extreme hard work, excelling at technical education and innovativeness. They are not prepared for that. I really get amused at the scenes beamed from Greece where the morons take to street against austerity measures without realizing that their country is bankrupt and but for rescue, they would be the beggar nation of the world.

Problems of PIGS countries provide very important insight in to working of democracy and left liberal socially progressive agenda followed by these countries. For example Greece has new political party in power which inherited the serious economic problems left by the previous party. Now new party has to tax the people, cut the services, cut generous pension and implement austerity measures. Very unpopular steps indeed. In the next election, the morons in Greece would certainly discard the ruling party. Again socialist would assume power and the circle would complete. I was listening to a political commentary on U.K. and one gentleman told that the conservatives who have assumed power would fix the economy by cutting expenditure and social services and thus the deficit. However, the price that they would pay would be stupendous. Conservatives, in next election would lose power and would not be back for at least next 15 years as their steps would be very unpopular.

In democracy, the political party which understands that 80% of the voters are moron, rules the longest. Obama understands that and hence has been following the socialist agenda. He would rule for 8 years, bring USA to the brink of bankruptcy and then the Republicans would have to take unpopular steps to fix the economy and hence would lose power to Democrats in the subsequent election. Poor Hillary would be too old to contest for presidency by then. MMS and Congress also follow the same policy. However, for them silver lining is that Indian people are very hard working, intelligent and are servile.

I am frank to admit that I feel good about the pains that PIGS will undergo. These are the criminal nations who inflicted horrors on other countries. Portugal’s record is just horrific and the torture and killing of people in Goa is unparalleled in the history. Some economic pain would be good for them. As regards Spain, that country in any way would be owned by Islamic people in next 3 to 4 decades. This crisis would prepare them for the horrors that would follow.

I am just worried about contagion affecting Canada though I personally believe that Canada with its vast natural resources would be spared much pain.

The following article by brilliant Mr. Satyajit Das should warm the hearts of left leaning socially progressive Obama lovers.


European Union rescue is like sharing needles...we'll all end up HIV+

Basically you can choose how you want to die.

As Woody Allen once observed: “More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.”

http://www.dnaindia.com/money/interview_european-union-rescue-is-like-sharing-needleswe-ll-all-end-up-hiv_1386899-all

Quote:

---

Originally posted by MGupta

http://2.bp.blogspot.com/_ENU3_782vjk/S2xez9YoRFI/AAAAAAAADYg/fkQukXtpss0/s320/Don%E2%80%99t+call+the+PIIGS+PIIGS!.jpg" border="0" alt="http://2.bp.blogspot.com/_ENU3_782vjk/S2xez9YoRFI/AAAAAAAADYg/fkQukXtpss0/s320/Don%E2%80%99t+call+the+PIIGS+PIIGS!.jpg" />

Quote:

---

Originally posted by Nightmare

Double dip recession fears are real. The nightmare scenario is unfolding fast and would likely engulf the entire world like crisis in USA did. The European people are lazy and some of them have been used to live off the hard work and savings of the other countries. Euro exchange value has been very high compared to the productivity and GDP of these nations. What I learnt in economics was that exchange value depends upon the GDP of the countries. Since these countries had high GDP because of the already high exchange rate of Euro, they enjoyed the labor of other countries. I still wonder how Euro can be at Rs. 65. Is it they are productive by 65 times? How does a bank clerk in Canada be more productive by 50 times than a clerk in India? How is that a TTC ticket collector sleeping on the job can add $80,000 to Canada’s GDP while an Indian ticket collector adds $2,500 (Re. 100,000) to Indian GDP?

Anyway, China has changed the entire game and though not acknowledged as number one super power officially, business world knows that. (Do not misunderstand me. I do not like this AT ALL) The PIGS countries have no resources, no innovative spirit and socialist economies where the lazy idiots are hooked to the state taking care of them in all respects. Now these states have been exposed and nobody is willing to lend them. These states have used up all their wealth looted from the “third world” countries of Asia, Latin America and Africa. They can not reconcile that now they can no longer afford luxuries by rearing Sheep and Goats. Competing in increasingly integrated world economy requires extreme hard work, excelling at technical education and innovativeness. They are not prepared for that. I really get amused at the scenes beamed from Greece where the morons take to street against austerity measures without realizing that their country is bankrupt and but for rescue, they would be the beggar nation of the world.

Problems of PIGS countries provide very important insight in to working of democracy and left liberal socially progressive agenda followed by these countries. For example Greece has new political party in power which inherited the serious economic problems left by the previous party. Now new party has to tax the people, cut the services, cut generous pension and implement austerity measures. Very unpopular steps indeed. In the next election, the morons in Greece would certainly discard the ruling party. Again socialist would assume power and the circle would complete. I was listening to a political commentary on U.K. and one gentleman told that the conservatives who have assumed power would fix the economy by cutting expenditure and social services and thus the deficit. However, the price that they would pay would be stupendous. Conservatives, in next election would lose power and would not be back for at least next 15 years as their steps would be very unpopular.

In democracy, the political party which understands that 80% of the voters are moron, rules the longest. Obama understands that and hence has been following the socialist agenda. He would rule for 8 years, bring USA to the brink of bankruptcy and then the Republicans would have to take unpopular steps to fix the economy and hence would lose power to Democrats in the subsequent election. Poor Hillary would be too old to contest for presidency by then. MMS and Congress also follow the same policy. However, for them silver lining is that Indian people are very hard working, intelligent and are servile.

I am frank to admit that I feel good about the pains that PIGS will undergo. These are the criminal nations who inflicted horrors on other countries. Portugal’s record is just horrific and the torture and killing of people in Goa is unparalleled in the history. Some economic pain would be good for them. As regards Spain, that country in any way would be owned by Islamic people in next 3 to 4 decades. This crisis would prepare them for the horrors that would follow.

I am just worried about contagion affecting Canada though I personally believe that Canada with its vast natural resources would be spared much pain.

---

very good analysis....

PIGS deserve financial suffering..law of karma works

I know greece, spain, portugal and some otherEU countries had brutal history...but what Ireland and Iceland did wrong ???

the only thing i remembers these 2 countries had extremly strict visa rules for asians/africans...they never considered people from these continent equivalent to them

---