‘Historian Michael Rostovtzeff and economist Ludwig von Mises both argued that unsound economic policies played a key role in the impoverishment and decay of the Roman Empire. According to them, by the 2nd century AD, the Roman Empire had developed a complex market economy in which trade was relatively free. Tariffs were low and laws controlling the prices of foodstuffs and other commodities had little impact because they did not fix the prices significantly below their market levels. After the 3rd century, however, debasement of the currency (i.e., the minting and supply of more coins with diminishing content of gold, silver, and bronze) led to inflation ( this is equivalent to money printing)’ –source: Wikipedia
The ‘2008 Global Financial Crisis’ is not over. The current global economic situation is still very unsound, fragile and is in a state of a complete mess, as shown by high deficit spending, high debts, high unemployment, slow and negative growth with massive money printing to prop the economy.
So, who is going to be the next Rome? Just ponder on the following economic and stock markets situations before we search for the answer.
a) The US stock market keeps on rising despite the tepid economic growth of 2% (which is pumped up by massive money printing).
b) Unfortunately, The MSM is cheeringly announcing that the U.S. economy is in a robust shape because job growth is growing and getting better each and every quarter. I am telling you, based on honest calculations, they are actually losing 235,000 full-time jobs last month instead of 193,000 gains as reported.
c) In France and the U.K, stocks continue to march higher despite the recessionary growth. The mighty Germany is also enjoying a stellar rise in stock markets despite the anaemic growth of 0.5%
d) China is facing a strong headwind in maintaining her GDP growth above 7%. China can’t afford high employment and civil unrest and it looks to me, the “Yuan” will start to depreciate soon to boost its declining economy.
e) Massive trillion money printing pushes Nikkei to an all time high but growth is still very sluggish.
f) A commodity rich country like Australia is slowly edging towards ‘Recession’. Interest rate keeps on coming down and unemployment has started to creep up especially among the ‘youths’.
Now, the questions are: Why should the stock markets keep on going up despite the sluggish global economy? When is the crisis going to hit and will the stock markets implode? The answers have been given a few times in all my previous posts on my website www.johnyii.com Please read all the previous posts if you want to get a good picture of the declining world economy.
The next valid question: Which nation is going to be the first to trigger the next global financial crisis which is expected to be bigger than 2008 GFC?
Let’s us take a closer look at the latest developments in Euro Zone countries.
1. Constitutional crisis now is pushing Portugal closer to the brink of disaster.
Portugal government’s borrowing costs have escalated dramatically after key political parties failed to agree on economic and austerity policy. Yields on 10-year Portuguese bonds spiked up more than 100 basis points to 7.85pc in just one day. This causes the government to postpone the next review of the country's EU-IMF Troika bail-out until August. The general population is becoming increasingly restless as the nation moves down the similar path that Greece has gone through.
2. The economic crisis in the third largest country in the Euro zone, Italy, has taken another turn for the worse. Like the U.S. and Cyprus, Italy's Italian Finance Undersecretary, Pier Paolo Baretta, said that the government is considering imposing the tax burden on the wealthy ( and also more taxes on things that they can think of) in order to satisfy demands for broad-based fiscal easing and meet its 2013 deficit target. This is just the beginning of the dirty acts of the government.
Think about it carefully, the whole world will sink into an explosive condition where governments are at war militarily or financially with each other… Even now, things are occurring that should appal you! Governments are repressing more and more liberties and personal freedoms, chasing down assets to tax and confiscate everything you own – even your gold and silver. All these had happened in the past and there are no reasons why it will not happen again. Look at what President Roosevelt had done in the past.
Last year, Italy’s budget deficit was 3pc of GDP but is expected to rise further. Public debt is growing and rising too and by 2015, most major Euro nations are going to see at least 140% of debt-GDP ratio. The debt of the country has been downgraded to just one knot above junk status. Italy’s €2.1 trillion (£1.8 trillion) debt – 129pc of GDP – has already reached the point of no return for a country without its own currency.
3. Recently, France lost its Top Credit Rating at Fitch Ratings, which cited lack of growth and the build-up of debt in Europe's second-largest economy. France was downgraded one step to AA+ from AAA,. Moody's Investors Service and Standard & Poor's have all removed France from the shrinking club of top-rated governments. A few months ago, France’s labour minister came out to blast its own government by declaring that France’s financial position is on the verge of collapse.
4. Despite austerity drive and bailout, Greece’s debt is still going up. It is going to seek out more help soon. Germany (under the pressure of its own citizens) will soon find it hard to keep on lending. A leaked report from the European Commission confirms that Greece will miss its austerity targets yet again by a wide margin. Greece is missing targets because her economy is still in freefall and that is because of austerity overkill. The Greek think-tank IOBE expects GDP to fall by at least 6%. Can you imagine the livelihood of the Greeks when it hits minus 6% growth? China is now still growing around positive 7% and yet some experts (from MSM) have proclaimed that China would be the next major one to collapse!
5. In the U.S., mortgage rates are climbing up once again despite the declining economy. The 30-year fixed mortgage rose this week escalated to 4.51%, a two-year high from 3.35% just 2 months ago. Rates have been rising on expectations that the Federal Reserve will slow its bond purchases this year. According to the following chart, we can see that the U.S. real estate market will move into the second round of ‘bearish time’.
6. Based on honest calculation (not taking internal cost cutting into accounting), corporate earnings barely grows. More companies will start to issue negative earnings guidance for this coming quarter.
Whether you like it or not, the global economy and its monetary system are moving slowly into a breaking point. What are the consequences of a breakdown in the global monetary system? What should you do to protect yourself and prosper in the coming greater economic collapse? I will post my humble view this coming Friday.