Here Come the French…

 

We’re getting to the point in Europe where the lazy ne’er-do-wells are busily ganging up on the productive citizens in the name of “fairness”. A gang is also being formed here in the U.S., but the one we really have to worry about now is the EuroGang, our gang isn’t going to really raise its ugly head until late summer when it’s time to repeal the evil Bush tax cuts.

The Globe and Mail in London has the highlights:

The Organization for Economic Co-operation and Development has joined French and EU officials in calling for a move towards jointly-guaranteed euro bonds at a time it sees as perilous for the global economy.

In its twice-yearly economic outlook, the Paris-based international organization which specializes in economic policy for advanced economies, warned of a vicious circle in the euro zone, “involving high and rising sovereign indebtedness, weak banking systems, excessive fiscal consolidation and lower growth”.

[…]

So long as the euro zone crisis does not escalate, the OECD is forecasting a modest contraction of 0.1 per cent in the euro zone economy this year, compared with growth of 2.4 per cent in the US and 2 per cent in Japan.

Looking at the last month should give a careful reader pause. I’m not clear what the phrase “does not escalate” means, but I’m pretty sure the folk at the OECD are living in an alternate universe.

Here’s a taste of today’s headlines and I have more than a little doubt if this counts as “not escalat[ing]”…

FOREX-Euro falls vs dollar on fears debt crisis may spread
* Spain’s Catalonia asks for help, raises contagion fears * Uncertainty in Greece keeps sentiment bearish NEW YORK, May 25 (Reuters) – The euro slipped to near two-year lows against the dollar on Friday, rattled by fears of a possible Greek exit…

Spanish Lender Seeks 19 Billion Euros; Ratings Cut on 5 Banks
MADRID – Standard & Poor’s slashed its ratings on the creditworthiness of five Spanish banks on Friday, just as one of them – Bankia, the nation’s largest real estate lender – requested an additional 19 billion euros in rescue funds

US Stocks Flat To Lower As Worries About Spain Weigh
By Alexandra Scaggs Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)–Stocks were flat to lower ahead of the long weekend Friday, as investors dismissed rosy consumer confidence readings after one of Spain’s regional governments said it needed funding help.

Bankia, Catalonia pile on Spanish debt worries
By Fiona Ortiz and Carlos Ruano | MADRID (Reuters) – Financial troubles at a big Spanish bank and one of the country’s richest regions, Catalonia, piled on problems on Friday for the Madrid government and for investors who question whether it can pay …<<

Get the idea? This is just a quick scan of Google Business Headlines that popped up and I can guarantee that were you to Google “euro zone crisis” you’d find “About 59,100,000 results” like I just did.

As we’ve noted here many times, Europe is the U.S. largest trading partner. This does not bode well for us. Investor’s Business Daily makes the point directly.

The weakening economies in Europe and China are starting to weigh on U.S. factories, which lost momentum after months of building steam and pulling away from their global counterparts.

Markit’s new U.S. manufacturing index fell to 53.9 in May from 56 in April, signaling slower growth, the research firm said Thursday.

[…]

The eurozone’s manufacturing and service sectors slipped deeper into contraction, with powerhouse Germany softening more…

The probability is that we are looking at a very long, very hot summer. Greece is going to be out of the euro sooner rather than later, their elections will be held in mid-June and the era of austerity will come to a screeching halt. I expect them to default on their bonds and restructure payment in “New Drachmas” at a very dramatically lower principal value, as much as 75% off of face value. Spanish banks are history, they just haven’t stopped breathing yet and Spain will be the “New Greece”.

European banks as a whole are critically undercapitalized, are experiencing bank runs in Greece and Spain, and the combination of Greece defaulting and Spain could cause a major financial crisis in Europe that would bleed out on us and China.

The real message here, relative to the actual issue of policy and how to deal with the European – and American – economies was hidden by a fancy turn-of-phrase in the Globe and Mail article. Remember that the goal is to issue a “new” bond to recapitalize European banks that is secured by ALL of the Eurozone countries. I wouldn’t be surprised if they don’t try and wheedle the U.S. into the deal, and I also wouldn’t be surprised if the Obama administration is supportive of the idea. Here’s what the Globe and Mail notes:

“We need to get on the path towards the issuance of euro bonds sooner rather than later,” he said.

The OECD joined EU leaders in pressing for the “issuance of new jointly guaranteed government bonds to help recapitalize banks and enhance credit availability…

It also backed French proposals for increased resources for the European Investment Bank to fund infrastructure projects and better use of EU structural funds to promote growth.

Those “French proposals” are coming from the new, Socialist French Premier who “hates” business and desperately wants to be able to borrow significantly more money so his government can hire more “public servants”.

This scheme is nothing more than a Socialist effort to expand the reach of governments all over the world. They’re going to push to continue to print and borrow money until they’re out of ink. No word on who’s going to pay for this largesse, but you can be sure that if you happen to have a job or assets, you will be on the “payer list”.

-Michael Becker

 
  • http://www.facebook.com/profile.php?id=1201877811 Cynthia McBride

    Oh, but he is a socialist, therefore, like Obama, he really MUST be God, right? And they will worship him like the idiots here worship this dictator wannabe!

  • http://www.facebook.com/profile.php?id=1083210303 Robert Tanguay

    wait till you see what we get here if they give asshole another 4 years!

  • http://www.facebook.com/profile.php?id=100000570076047 Chuck Picklesimer

    France evidently isn’t prepared or qualified for self-government.

  • http://www.facebook.com/profile.php?id=1152445405 Mike Mier

    Well…. The French have never really been very smart.

  • http://www.facebook.com/profile.php?id=1393743164 Joseph Dennis Boyer

    So many are so blind as to the cause of the economic collapse that is occurring on both sides of the pond. Politicians are concerned with reelection, and buying votes not the longterm welfare of Their Country.

  • http://www.facebook.com/profile.php?id=1397306673 Ronald Greene

    So many of the conflicts of the last century were begun by the French….what will they cause next?

  • http://www.facebook.com/profile.php?id=1462099106 Curtis Hartwell

    France playing “catch up” to the disaster…

  • http://www.facebook.com/profile.php?id=1281032229 Mitchell Greene

    Viet Nam, number one for me… Why the U.S. agreed to intervene in an old Colonial dispute is beyond me….

  • http://www.facebook.com/profile.php?id=1397306673 Ronald Greene

    Ah, yes…French Indo-China….says it all.

  • http://www.facebook.com/profile.php?id=1290981769 Frank Crumpler

    And then watch what happens to the USA if Nobama gets re-elected for 4 more years. Our economy is already in the toilet. It will be flushed and take many, many years to recover, if ever

  • Paola Arduini

    The Franch,like the rest of Europe,have been on a vacation for the last 40 years,they get paid 14months out of the year, 6 weeks vacations etc.Let’s not talk about the arrogance of these people, they have to face the fact that the well is empty , the new chief can promise all kind of goodies,but they are in the Eurozone and cannot print money,and if we don,t change the Obanites in our country we will be worse than the French.