headed for eventual economic collapse
Written by Stephen Lendman
Date: April 7, 2012
Subject: Economy – International
The Pain in Spain
by Stephen Lendman
Ireland, Portugal, Italy, Belgium, are Spain replicate Greece
in slow motion, gain speed, and head toward a similar train wreck.
France, the Netherlands, and other troubled EU economies follow close
Austerity cuts exacerbate problems. Public rage expressed in
strikes and street protests follow. Politicians pay no heed and plan
At the same time, they allocate hundreds of billions in vital
revenues for criminal bankers responsible for the crisis in America and
No wonder John McMurtry calls predatory capitalism a “cancer
system.” It gets “cumulatively worse the longer it is unrecognised.”
On March 31, the European Financial Stability Facility (EFSF)
pledged an additional 200 billion euros for the European Stability
Mechanism (ESM). It raises its total amount to 500 billion euros. Its
overall firewall totals 800 billion euros, or does it?
In fact, 100 billion euros is European Financial Stabilization
Mechanism (EFSM) money. It’s already earmarked for Greece, Portugal and
Ireland. Another EFSF 200 billion is allocated for existing bailouts.
In other words, 300 billion in double counting means less than reported
Despite the 800 billion euro headline figure, at most 500
billion is available, depending on whether pledged amounts provide it.
All contributing nations fund the ESM. Nominally, Spain’s the fourth
largest contributor. However, its private and public debt way exceed
the pledged ESM total.
If Madrid needs help, Germany, France, and other contributors
have to make up the difference. Whether they’ll do it short-term is
questionable. Longer-term’s not politically or economically sustainable.
Troubled Eurozone countries can’t manage their own problems.
How can they take on more? Even German resources are finite. Its
political will has limits. It can’t bail out Europe alone without
crushing its already weakening economy.
Money power in private hands caused today’s problems. As a
result, economies, communities, and households have been hollowed out.
Bad as things are now, expect worse. Austerity assures it. So does
On March 29, rage spread across Spain. Up to 80% of workers
supported a general strike. Stoppages affected industry, transport, and
other services, including hospitals providing minimal amounts.
Dozens of protests and rallies brought hundreds of thousands
to the streets nationwide. Police violence confronted them. Injuries
and arrests followed. It happens every time across the continent, in
Britain and America.
New labor law changes demand harsh concessions. Workers must
sign contracts limiting severance pay to 33 days for each year worked,
up to 24 months for unfair dismissal.
If layoffs are “financially driven,” companies need only pay
20 days’ wages. They can fire more freely, reduce working hours, and
pretty much do as they please. Collective national agreements are
undermined. So is Spain as a decent place to live.
On March 30, its Popular Party government announced $36
billion in 2012 cuts. They follow $20 billion earlier with more to
come. Spanish economists call them “the most severe since Franco.”
Measures involve freezing civil service wages, ministerial
spending cuts, and new corporate taxes.
Ministries had budgets slashed 16.9%. Foreign Affairs lost
54.4%, Justice 34.6%, Defense 31.9%, Education, Culture and Sport
21.2%, Agriculture 7.4%, Health 4.3%, and Economy 3.8%.
Civil servants suffered earlier. In December, the work week
increased from 35 to 37.5 hours without extra compensation, and wage
cuts up to 15% took effect in May 2010.
On April 1, electricity prices rose 7% and gas 5%. Other price
hikes are coming with austerity strapped workers less able to handle
Spain has Western Europe’s highest unemployment. Overall it
approaches 23%. For youths, it’s 50%. Expect those numbers to rise,
Prime Minister Mariano Rajoy wants Spain’s 2011 8.5% budget
deficit cut to 5.3% of GDP. Like Greece and Portugal, stiff government
spending cuts affect economic activity severely. Production falls.
Unemployment rises. So does public anger.
Nonetheless, EU Economic and Monetary Commissioner Olli Rehn
urged he implement measures immediately, saying:
“The unambiguous commitment of the Spanish government to the
target of 3 percent fiscal deficit in 2013 is indeed of paramount
importance. I expect this will be substantiated soon by a convincing
path of fiscal consolidation,” as well as economic reforms putting
Spain on a “more sustainable growth model.”
Nothing in Spain’s budget produces growth. Debts aren’t
addressed. Lower national income and GDP will follow. Capital flight
continues. People are voting with their feet and leaving. Private
sector lending is down. Housing prices keep falling, and household
savings are evaporating. It mean lower consumption’s coming.
Moreover, Spanish banks are insolvent. Private business
overall is troubled. Weak conditions are worsening. Budget cuts
exacerbates them. Revenues are declining. Debt’s rising. Recession’s
deepening. Budget cuts when increases are needed assure much worse
Like other troubled Eurozone economies and America, Spain
force-feeds austerity when stimulus is needed.
According to an unnamed government official:
“….let’s not deceive ourselves. We are holding on thanks to
the artificial respiration of the open-bar-liquidity of the European
Central Bank.” If not for that, “this explodes.”
How long that continues isn’t known. It depends on Germany’s
willingness to provide it. Its Bundesbank is the ECB’s backbone. If
German resolve wanes, all bets are off, and economists expect it
Progressive Radio News Hour regular Bob Chapman says up to $6
trillion’s needed to bail out Spain and Italy combined. If both
countries require amounts near that great, it’s game over. No one has
enough to provide it.
Day of reckoning times approaches, but no one knows when.
A Final Comment
Economies built on sand collapse. America is no different.
Financial analyst Martin Weiss says “the government bubble is the
biggest of all time,” and expanding.
He cites an unprecedented growing national debt bubble.
“Washington spent a record $16.3 trillion since 2007.” America’s debt
burden exploded and keeps rising because of trillion dollar + annual
In addition, we’re “witnessing the Greatest Monetary Bubble in
US history.” Massive money printing went for speculation, not economic
growth. Moreover, zero interest rates tax savers. Their net worth falls
as inflation rises.
It’s rising much more annually than reported. Everyone who
eats, drives a car, heats a home, buys health insurance, has medical
bills, and pays college tuition knows more about inflation than
Bob Chapman thinks it’s around 10%. Manipulation lowers
official figures. It’s been going on for years.
Eventually says Weiss, America’s chickens are coming home to
roost. Bubbles don’t expand forever. Foreign investors are shunning US
debt. The Fed’s had to compensate by buying record amounts.
In 2011, it bought “a stunning 61% of the total net Treasury
issuance, up from negligible amounts” pre-2008.
Excess money printing not providing economic growth eventually
fuels trouble. Higher inflation’s coming. Bonds always get it right.
When interest rates rise in response, bursting the government’s debt
bubble draws closer.
They all burst. So will this one. When it does, the fallout
will hit globally. Financial analyst Marc Faber also predicts eventual
“massive wealth destruction.” At issue is out-of-control money printing
and runaway government debt.
Appearing on CNBC, he said:
“Somewhere down the line we will have a massive wealth
destruction that usually happens either through very high inflation or
through social unrest or through war or credit market collapse. Maybe
all of it will happen, but at different times.”
Before then, the Fed will keep printing money. “(T)hey’re
going to print and print and print. So what you can get is a bad
economy with rising equity prices” until the entire house of cards
It’s coming he predicts but can’t say when. His advice and
others like Chapman and Weiss is prepare now. Forewarned is forearmed.
Good times never last when fueled by excess.
Bad endings always follow. This one promises to be a whopper.
Moreover, on their own and out of luck in America and Europe, ordinary
people will be hurt most.
If pain exceeds thresholds of no return, all bets are off.
Often the unthinkable happens. Rebellion at times follows. Street
protests are precursors. What happened before will again. Bet on it.
Stephen Lendman lives in Chicago and can be reached at
Also visit his blog site at sjlendman.blogspot.com and listen
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