Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24
Orwell 2024 - AI Equals Loss of Agency - 17th Aug 24
Gold Prices: The calm before a record run - 17th Aug 24
Gold Mining Stocks Fundamentals - 17th Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is This Just the Beginning of the Euro Debt Crisis?

Interest-Rates / Eurozone Debt Crisis Dec 15, 2015 - 05:16 PM GMT

By: Harry_Dent

Interest-Rates I've been shocked over how much QE and stimulus the central banks have signed on for in the last seven years, but they’re finally starting to reach their limit.

The U.S. already did in 2014 when the Fed finally tapered. And this week, the markets are betting on a rate hike – never mind the trouble brewing in China, other emerging markets, and now Europe.



Good luck with that.

There’s just too much going on in the world suggesting deflation is the real fear, yet the Fed’s betting on 2% inflation to justify a hike. Give me a break!

There’s a reason the Fed has put off raising rates time and time again, and it hasn’t gone anywhere.

The fall in commodities prices is nowhere near its conclusion. That will only continue to ravage emerging nations as those prices continue to fall for several years.

And now Europe has its own troubles that are only getting worse… and could potentially signal the end of the euro and the economic bloc itself.

Recently I explained why the attacks on Paris were such a major issue. It was like the 9/11 wake-up call over here. Sure, our attack was larger. But Europe’s came after the recent terrorist attack on Charlie Hebdo, and while a massive refugee crisis was already calling everything into question.

This recent escalation in terrorist events, including the Russian Metrojet being bombed, only creates an atmosphere within the euro zone of individual nations re-asserting their own sovereignty over one another. And that includes controlling their own borders and trade flows.

That’s been the major flaw of the euro and the euro zone from the beginning.

These very diverse nations with long histories of shifting alliances and wars don’t really trust each other – they never did. And they’d never fully submit to a fiscal and political union. Greater trade and migration flows were just fine – until something went wrong. Something like the Paris attacks… Russian aggression in the Ukraine…

Or 800,000-plus refugees from Syria and the Middle East, with three million or more still expected to come.

It’s a giant mess! And the refugee crisis specifically is a huge expense to the many European nations accepting them, all while they’re teetering on the verge of recession again.

The truth of the matter is that the euro zone came late to the party. A trade and currency union was doomed from the start. And now that union is increasingly disintegrating.

That can only get worse if the global economy continues to implode, and I see a 99% chance of that in the next few years. All of that’s piled on worsening demographic trends ahead, and the continued rise in geopolitical threats through 2019 on my 35-year cycle for that.

With massive QE, and the pledge from ECB President Mario Draghi that he will do whatever it takes to reach target inflation, most think the euro zone has largely come out of its crisis.

Little do they know the economic bloc is basically falling apart.

This chart pretty much sums it up:

Shown here are the percentage of loans outstanding that are at least 90 days past due, and the percentage of these nonperforming loans to GDP.

This ranges from the first tier of banking systems that are already clearly insolvent… to the few strong, yet small nations that are nearly sound.

Among the worst are the usual suspects – Italy, Portugal, Spain, Ireland, and of course Cyprus.

And I doubt it’s a coincidence that Greece isn’t even on this chart.

To put it simply – Europe is caught in a downward spiral of its own making. The euro allowed the weaker countries to borrow at lower rates on their loans… and the stronger ones to export at lower rates on the currency. Now it’s coming to a head… and this great imbalance could unravel the whole system.

While North America will merely plateau in the years and decades ahead, this period will potentially represent the Dark Ages for much of Europe, with terror threats only getting worse in the next several years.

Meanwhile, Janet Yellen thinks she can raise rates… and Mario Draghi is convinced he has an unlimited box of tools to rig Europe’s economy, even though he recently failed to muster enough votes at the ECB to raise QE as expected.

They never learn.

Make no mistake: Europe is dead. It’s just that no one has announced the funeral yet.

Harry

http://economyandmarkets.com

Follow me on Twitter @HarryDentjr

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2015 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Harry Dent Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in