Late Sunday night the EU announced that they have agreed upon an 85
Billion Euro ($113 Billion) bailout for Ireland.
Early media reports sought to calm global stock
markets by suggesting that crisis talks were over and the deal was just
about inked.
The problem is, however, that even though the EU wants to give
Ireland a bailout, the Irish people may have none of it. Ireland’s debt
crisis, though a drop in the bucket compared to that of Spain (and the
USA), may be the catalyst for a complete bond meltdown in Europe if the
Irish Parliament refuses to accept assistance from the IMF et. al. :
Therefore, the next week will be crucial, in Ireland. The
next week could likely decide the fate of the Eurozone.
If the popular perception grows over the coming week that the Cowen
government sold out the country to the IMF and the EU, then it is
possible—very possible—that the austerity budget will not pass on
December 7.
This would be a disaster to the European Union.
Is such an outcome likely? Will the Irish reject the austerity budget
on December 7? Will they instead force the Irish banks to default on
their debt?
…
But if the Irish reject the austerity budget on December 7,
it is obvious that the Spanish problems will come to a head a lot
faster.
An Irish rejection of the bailout would send the bond markets
into a frenzy—Spanish debt would immediately come under pressure,
likely crashing before Christmas. Italy would come immediately next. The
whole Eurozone could be ablaze by the New Year’s.
Therefore, the EU needs to make the December 7 budget vote go
smooth—they need to pull out all the stops and make the Irish understand
the situation. They need to make them see the wisdom of making
sacrifices for the well being of British and German banks.
Source: Gonzalo Lira
We realize that the goings on in Europe are not the concern of the
majority of Americans - we’ve got plenty of problems right here at home -
but, consider what may happen to US stocks, bonds and our economy in
general if Europe collapses.
Correction: Not
if, but
when.
We’ve maintained, that like the US, the coming European collapse is
inevitable. Even if the Irish accept the bailout, the EU still has Italy
to deal with, as well as Spain, which would require a bailout five to
ten times times larger than Greece, Ireland and Portugal combined.
In early November we asked
Is a Monster Reversal In Stocks, Commodities, and the
US Dollar in the Works?
We will soon find out, either by the end of this year if Ireland
doesn’t take the bailout, or by next Summer, at which time Spain’s
problems will be the talk of mainstream financial pundits the world
over.
Whatever the case, whenever Spain and Italy finally do have a
meltdown in their debt markets, we can see massive capital flows
shifting from Europe to the US.
This means that the Euro may be annihilated, while the US dollar
benefits.
The result?
If we had to guess, further continuation of the European debt crisis
will lead to falling equities, commodities and perhaps even precious
metals (for a time). Depending on the severity of how the EU crisis is
perceived, we may even see a sharp correction or crash in US financial
markets.
This, of course, may lead to further erosion of the American
consumer, as many will fear that a double dip recession has occurred
(those paying attention realize that we’re way past recession and in the
throes of another great depression), leading to further reinforcement
of the negative feedback loop of rising unemployment, falling wages, and
increased government assistance.
Keep an eye on Europe, it is a good indicator of things to come here
in the US.
The New York Times has a revealing article about how a popular textbook for family doctors on how to treat mental illness, apparently written by two big name psychiatrists, was almost entirely written by a ghostwriting service under the direction of a large drug company.
