Many people sighed with relief the other day when it was announced that the EU would bailout the banks of Spain with $120 billion at 3% interest. Well, the markets and credit rating agencies were not impressed. In today’s news we learn that Moody’s down graded Spain three notches to near junk bond level and Spain’s ten-year bonds went to 7.1%. Very dangerous territory, my friends. On top of that, Italy’s three-year borrowing costs spiked to 5.30 percent
Think about the insanity of this bailout of the Spanish banks for just a minute. Spain is on the hook for this loan to the banks. Are they going to have to borrow money at something nearing 7% to repay the 3% loan? And further more, where does this bailout money come from? It comes from the nation members of the Euro Zone, which includes the other PIIGS (Portugal. Ireland, Italy, and Greece). Are they supposed to go out and borrow money at high interest rates to loan it to Spain at 3%? Take a look at this short video of Nigel Faarage. It’s a gas!
H/T to Frankenstein Government
Of course, the real burden falls on Germany and the Scandinavian countries. This humble observer continues to believe that the single currency Euro was a bad idea from the start and the only way the Euro Zone can survive is if it becomes the United States of Europe under one government. Since that is not likely to happen, the Euro Zone will come undone, in my opinion. Hang on to that thought and I will return to it in a moment.
The economic woes do not just lay with the Euro Zone. It is a world–wide phenomena. The fiat currency system of the world’s central banks is in jeaprody. For those that are interested in learning more, I have some suggested reading for you. On 9 June, Steven Hayward at Power Line wrote about the economic downturn in China. Then the next day he wrote a similar article about India’s slowdown. I’m pretty sure that Hayward could write about the same thing about Brazil. For a broader view, you really need to read this article at Zero Hedge. It starts with this little gem:
A Loss of Credibility
Once at a social gathering, Gladstone said to Disraeli:
“I predict, Sir; that you will die either by hanging or of some vile disease“.
“That all depends, sir, upon whether I embrace your principles or your mistress.”
I’m reminded of that photo of George Bush with the caption “Do you miss me yet?” I picture the photo being the United States asking China: “Do you miss US yet?”
So, what does this all mean for the United States of America?
Well, it could be very bad indeed. But, it doesn’t have to be as bad as most people think.
I recently asked a friend, at his blog , if he thought it would be better for the EU to crash on Obama’s watch or on Romney’s watch? (Yes, I think Obama is going to get creamed in November.) The reason for my question was that I used to think that when the EU dominoes began to fall it would be like going over a cliff. I didn’t want that to happen on Obama’s watch because I didn’t trust him and the Fed to do the right things. Now I see the EU sliding into the abyss on a long toboggan run. And now, I would prefer that the EU start their slide on Obama’s watch because maybe it will inspire Romney and the Republicans to come up with a more aggressive plan to right our economic ship. Allow me to share my dream of how America could demonstrate its Exceptionalism once more and lead the world back to economic sanity.
America is unique in many ways. Among them is our ability to produce all the food we need and much more, thanks to fracking technology we have the ability to be energy independent, and we have the ability and capacity to produce any products our citizens want or need at some price. I can’t emphasize enough how important it is for America to become energy independent no matter how low oil prices fall. And oil prices will continue to fall in spite of the desire of Hugo Chavez to see oil at $200 per barrel. If American starts down the road of energy independence and uses the royalties from production on federal lands to pay down our debt, if corporate taxes were reduced not to 25% but to 15% or less, if capital gains taxes and death taxes were reduced to zero, if all of our entitlement programs are reformed, and if the noose over regulation of our businesses was removed, the whole world would want to invest in America. America is in a unique position to lead the world to economic sanity. My dream includes putting an end to Federal Reserve notes and return to Treasury issued Silver Certificates; but that is probably more fantasy than dream. Will Romney and th Republicans make my dream come true? They could. They really could if they have the will to do it.
Well, that’s what I’m thinking. What are your thoughts?