The economy as we don't see it ... yet!

Angela Merkel (Germany) stated clearly over quite some time that the world needs to get used to Europe's adjustment to its "living beyond its means" as it needs to rethink its economic and social strategy. People feel they are entitled to a lifestyle without balance, a lifestyle of "take, but no give". As I grew up in Europe, I already noticed the luxury cars at the unemployment offices every Wednesday, where "unemployment pay" was handed out, the work hours going from weekly 40 to 32, more and more government interference and higher taxation with less and less representation. Greed started to take over as the impoverishment of World War II slowly faded away and "rights" became "claims without achievement". Societies have no longer a sense of pride, incentives to achieve individually are gone, rewards for accomplishments are barely existent and selfish and secular individual behavior is clearly on the rise. And not only in Europe, mind you!

If you look at Europe (17 member nations in the eurozone), it appears that real economic growth is the only way to come out of the economic chaos (which is only in its infant stages, but rapidly growing) in a healthy fashion. The problem is that in order to create this real economic growth, sacrifices will need to be made among which entitlements. Government workers will need to be reduced in numbers, the private industry will only thrive on incentives to achieve (keeping more of what you make so that risk-taking becomes interesting again), austerity and self-pride need to be promoted again among many other actions that need to be taken. The debt crisis in most European countries is not being contained and appears to lead toward the imploding of smaller and then larger banks, first in southern Europe, then all of a sudden overnight into northern Europe and the rest of the world.

Falling revenues, debt ratings, banks subjected to unserviced debt from other nations (e.g. Greece), and governments unable to access capital markets only enlarge the problems. Excessive public spending leading to rapidly contracting economies, first locally, then internationally and then inter-continentally, will ultimately bring the entire economic world to its knees and into a depression, not a recession, mind you, of which the likes we have not seen yet in economic world history with hyper-inflation (25%-35%), unemployment numbers (25%-30%) combined with starvation and civil war leading up to wars among nations (see also previous blog). This scenario will be energized and thus worsened by the actions taken by Middle-Eastern countries, specifically Iran, Syria, Egypt and surrounding nations.

When looking at a few eurozone nations, observe how Belgium is nationalizing banks (Dexia), has a stalling economy (being 6th in the euro region) when looking at its third quarter, in which growth of its gross domestic product was the same as for its second quarter, 0.4%. Cyprus is completely falling apart with a demand for austerity by the IMF after an 11-day visit. Its real estate & construction sector alone is down 40%! Portugal's contraction is up from 1.8% to 2.2% and its overall economic condition is downright poor, but nothing compared to Spain where the unemployment has risen from 20.9% during the last quarter to 21.5% this quarter or close to 5 million unemployed! This percentage is the highest since 1996.

And France is only becoming very aware of the new economic environment it finds itself in. In a recent television program, France's President Sarkozy shared with his constituents that hard times are coming and that instead of budget cuts of 8.5 billion, they will now need to be 11.3 billion U.S. dollars. France's public debt is already more than 70 billion U.S. dollars per year and increasing rapidly as such.

And then there is Germany, the healthiest of all and the backbone of the European economy, appearing to stall in its economic growth as of next year. The last quarter it only grew by 0.4%.

A visit to China by European leaders was very disappointing as little to no results were obtained. It appears now that the European markets will continue to contract rapidly and once this accepted by its leaders, Europe will go into a free-fall overnight taking the rest of the world economy with it in its crash.

When this happens, not "if" in my opinion, and due to today's technological communication systems worldwide, we will see that a depression will be entered from one day to the next and serious problems will arise in economic, socio-demographic and possibly military terms.

My prediction is famine, world-unrest, wars before we see a - possibly not - return of peace and quietness and a rebuilding of trust and world economies. I will discuss more details in blogs to come. The stock markets are extremely overvalued, gold/silver and other commodities are undervalued, including oil. Corrections of tremendous proportions will take place. "When", you are asking ... within 6-9 months the start will be quite obvious at the very latest, I believe. Hopefully, I am wrong!

Hopefully, leaders of all kinds, worldwide, will take constructive and corrective action to make people believe in themselves again, to correct the economic wrongs of the past and to bring economic discipline where it is needed and social flexibility where it is demanded. It is clear that hard and decisive actions have to be taken for this world economy to have any change of survival in the form as we know it.