Amid growing speculation over the collapse of the euro, British embassies are now preparing for worst-case scenarios, such as riots and civil unrest. The Telegraph reported, “British embassies in the eurozone have been told to draw up plans to help British expats through the collapse of the single currency, amid new fears for Italy and Spain. As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.”
The euro’s endangerment comes as the International Monetary Fund, of which Britain is a large shareholder, may be forced to give Italy a rescue package that would allow its new Prime Minister, Mario Monti, time to implement tax increases and spending cuts.
Likewise, revelations indicate that a pact has been struck between German Chancellor Angela Merkel and French President Nicolas Sarkozy that did not include Britain, nor did it include countries outside the European Union. Under that plan, EU member states will be forced to have their budgets approved by the European Union before even being approved by their own national parliaments. Likewise, countries will have to sign on to new rules on the size of debts they may take on and will be sued in the European Court of Justice for any breach of those rules.
Despite not being a member of the European Union, Switzerland is under intense pressure from Brussels to raise taxes as companies flee high-tax EU welfare states in favor of more business-friendly Swiss cantons. And if the nation refuses to bow down soon, so-called “eurocrats” are threatening retaliation.
The Swiss government has been in discussions with EU bosses for over a year regarding Switzerland’s non-compliance with the “EU Code of Conduct for Business Taxation.” The EU’s goal, according to the Swiss Broadcasting Corporation, is to eliminate what the supranational regime in Brussels calls “harmful tax practices” — low taxes which attract capital, businesses, jobs, and workers away from the crumbling European super-state.
JBS CEO Art Thompson's weekly video news update for Nov. 28-Dec. 4, 2011.
In its attempt to quell rising uneasiness in the wake of the failed German bond sale last week, the establishment magazine The Economist rushed in over the weekend with a series of four separate articles promoting its globalist and internationalist perspective on the matter.
The first article noted that the risk to the euro within the next few weeks is “alarmingly high” unless measures are taken. The article blamed lack of leadership — “denial, misdiagnosis and procrastination” — for the unfolding and accelerating crisis. First, a recession appears to be imminent as the austerity measures are taking hold across the euro zone and slowing already shaky economies.
Second, there is evidence of a run on banks holding large positions in the sovereign debt of the weaker countries. As the banks are facing a June 2012 deadline to improve their capital positions they are now seizing this opportunity to unload as much of that debt as they can, thus explaining the significant rise in interest rates all across the zone. This reflects the simple fact that the banks have loaned money to each other — loans that exceed their deposits, according to The Economist — and now are unwilling to continue to make those loans. This is putting the various spendthrift — “feckless” is their word for it — governments at risk of default when they can’t borrow the money to pay their bills. Especially at risk is Italy, which has to roll over $42 billion of debt the last week in January and another $62 billion at the end of February.
The Republican Small Business Committee reported on November 8 that small-business optimism “remains extremely low,” and that business owners “simply are not hiring because they are pessimistic about consumer sales, the nation’s economic climate, and the amount of regulations to comply with.” Committee Chairman Sam Graves (R-Mo.) added, "The overall mood of the nation’s job creators is still at historic lows. The [Optimism Index of the National Federation of Independent Business] shows that over the next three months, only 9 percent of small business owners plan to increase employment [while] 12 percent plan to lay off workers. These numbers are … worse than the previous two months."
NFIB's Optimism Index has shown precious little change going back to January of 2009 and is matched by the University of Michigan’s Consumer Sentiment Index, which noted that “more households reported that their finances had worsened rather than improved for the 48th consecutive month [and that] just 22% of consumers expected their finances to improve” in the coming year. Further, in each of the past four months, “the majority of consumers unfavorably rated the policies of the Obama administration.”
The Consumer Confidence Index issued by the Conference Board also showed consumer expectations at 51.8, down 10 full percentage points just since April.
By every appearance, we are entering the final, calamitous act of the European debt crisis, a sprawling, slow-motion debacle that is about to engulf the world in financial turmoil more acute than the American meltdown of 2008. For roughly two years, European authorities have struggled to keep the debt crisis from spinning out of control, doling out bailouts to small, heavily indebted nations such as Ireland, Portugal, and Greece. “Contagion” — the notion that a sovereign default in, say, Athens, might trigger a cascade of woes elsewhere — has been and remains the watchword.
But, with Italy now propelled into the company of the desperately indebted, the Europeans have all but run out of options. Unlike Greece and Portugal, Italy, with its $2.6-trillion debt, is far, far too large to be bailed out. Italy’s political leadership — like America’s — has been absolutely unwilling to cut the expense of government, clinging like ivy to cherished government programs that cannot be sustained by any level of taxation. Over the past couple of weeks, markets have finally taken notice, driving interest rates, or “yields,” on most Italian government bonds to over seven percent. Today, for example, the Italians managed to auction off $10.6 billion worth of six-month bonds at yields of 6.504 percent. Two-year bonds, meanwhile, were selling for 7.64 percent, and 10-year bonds for 7.26 percent. By comparison, consider that six-month Italian bonds were selling for a mere 3.535 percent only last month, while two-year bonds were just above 4.1 percent in early October and at 2.3 percent in mid-March. Borrowing rates for Italy have more than tripled in a few months.
The “disastrous” failure of the German bond auction on Wednesday when buyers failed to bid the offering and Germany’s Central Bank — the Bundesbank — had to step in and purchase nearly 40 percent of the offering came just a day after SpiegelOnline posted an article critical of the country’s finances. The article virtually accused Chancellor Angela Merkel and her Finance Minister, Wolfgang Schauble, of “cheerleading” the economy’s supposed strength while ignoring major weaknesses. Merkel says her country has “a clear compass for reducing debt [and that] getting our finances in order is good for our country.” Schauble was an echo: Germany is a “safe haven [because] the entire world has great confidence in both the performance and soundness of the fiscal policies of the Federal Republic of Germany.”
Cracks in Germany’s economy were noted by Professor Wilhelm Hankel of Frankfurt University back in November of 2010: “Germany cannot keep paying for bail-outs without going bankrupt itself. This is frightening people.” He added,
You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings.
The House of Representatives voted down the latest proposal for a balanced budget amendment on November 18.
Under the terms of the Constitution, a constitutional amendment must be passed by a two-thirds majority vote in both houses of Congress and then be ratified by three-fourths of the states in order to become part of the Constitution. The vote in the House was 261 in favor and 165 opposed. That is 23 votes short of the necessary two-thirds.
In a statement issued by his office after the vote was taken, Speaker of the House John Boehner (R-Ohio) scolded the party across the aisle: “It’s unfortunate that Democrats still don’t recognize the urgency of stopping Washington’s job-crushing spending binge."
Others were pleased with the outcome, however.
Gerald McEntee, head of the American Federation of State, County and Municipal Employees, rejoiced in the rejection, calling it “a win for working families.” He praised Democrats in the House for boldly withstanding the attempt by supporters to pass a bill and “the deep cuts it would have made to Social Security, Medicare and Medicaid.”
Jeff Jacoby listed some of the reasons he was thankful on Thanksgiving Day in 2003, including the feast on the table, the company of his family and loved ones, the good fortunes enjoyed during the year, the privilege of being an American. But what about such common things taken for granted, like airline schedules, and movie theaters, and recipes in the paper — and the turkey?
He wrote, “Isn’t there something wondrous — something almost inexplicable — in the way your Thanksgiving weekend is made possible by the skill and labor of vast numbers of total strangers?” The magnificent choreography of the free market, including the poultry farmers, the food distributors, the truckers, the architects who built the hatchery, the technicians who keep it running, the people prepping the turkey — from slaughter to defeathering to inspecting to wrapping to transporting to pricing to displaying — all of this coming together voluntarily by the mystery of the free market. All of this, he said,
had to be precisely timed so that when you showed up to buy a fresh Thanksgiving turkey there would be one – or more likely a few dozen – waiting. The level of coordination that was required to pull it off is mind-boggling.
With the nation still deeply in debt and Americans struggling to make ends meet, residents in an Ohio valley are proving to the nation that perseverance and optimism are key ingredients to overcoming economic woes.
Mahoning Valley, Ohio, was once a thriving area, but that was before the steel factories were shut down. "The factories no longer spew black smoke into the sky, there are no employees patrolling behind their high metal fences, the lights inside are permanently off and there's an eerie silence all around," Fox News reports. "The buildings stand as large, empty symbols of the industry that used to keep the Mahoning Valley running."
Local historian Jim McFarland explains, “This was the center of the steel industry, mostly because of the location, halfway between Pittsburgh and Cleveland, halfway between New York and Chicago — that led to a lot of manufacturing.”
That manufacturing resulted in a vast number of jobs in steel plants along the Mahoning and Cayuhoga Rivers, where generations of families were employed.