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	Forecasting America's Destiny ... and the World's

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Generational Dynamics Web Log for 16-Jan-2010
16-Jan-10 News - Greece and Portugal head for financial crisis

Web Log - January, 2010

16-Jan-10 News - Greece and Portugal head for financial crisis

The 'rich nations' are not far behind.

Europeans turn more hostile over Greece's budget deficit

According to a report by Reuters, euro zone finance ministers are so furious about Greece's previous lies about budget deficit figures that there is little willingness to bail Greece out.

"German taxpayers would have little patience if you tried to tell them you are using their money to bailout a country that has consistently and knowingly reported wrong data and has repeatedly infringed EU budget rules," according to one source.

Thus Greece and euro zone finance ministers continue on their collision course, a game of "chicken" as I called it a couple of days ago, and unless one side or the other swerves, the result will be a Greek default with consequences that no one can predict.

Moody's: Greece and Portugal face a 'slow death'

Moody's rating service says that Greece and Portugal face "a slow death," according to a Bloomberg report.

Both countries will have to dedicate a higher proportion of their wealth to paying off their enormous debt. To make matters worse, both countries have to pay very high interest rates because of the danger of default, because of their enormous debt. So both countries are in a vicious spiral.

From the point of view of Generational Dynamics, this conclusion is completely rejected. If Europe were in a generational Recovery or Awakening era, then some kind of prolonged paydown of debt might be a possibility, but not during a generational Crisis era. The population of each country will not tolerate such a debilitating scenario for long. Their "Boomer" and "Gen-X" populations will even choose war after a while, rather than suffer the kind of "slow death" that Moody's is describing.

An analysis by the Financial Times says that even in the "rich world," debt levels are rising almost uncontrollably. "The biggest increases have occurred in Iceland, Ireland, the US, Japan, the UK, and Spain. There is no peacetime precedent for the current speed and scale of public debt accumulation and it is difficult to assess the social tolerance for high debt levels, and for the pain of protracted fiscal restraint. In several EU member states, the threshold has already been breached. The spectre of sovereign default, therefore, has returned to the rich world."

From the point of view of Generational Dynamics, the financial system is like a huge ball rolling downhill, faster and faster, headed for an enormous collision and smashup.

2008 was the year of the defaults of failing banks -- Bear Stearns, Lehman -- and failures. 2009 was the year of the bailouts of failing banks and car companies. 2010 is shaping up to be the year of failing countries. Each year, the financial damage is worse than the preceding year.

As I've been saying for years, the world is in a deflationary spiral, as the massive real estate and credit bubbles continue to deflate. (Anyone who says we're facing superinflation is an idiot. See Ambrose Evans Pritchard's analysis.)

That means that everyone is "deleveraging," and each month there's less money in the world than there was the month before. As that process continues, there's less and less money to support failing banks, failing car companies, and failing countries. It's only a matter of time before some event triggers a massive worldwide panic. The timing can't be predicted, but the result is 100% certain.

(Comments: For reader comments, questions and discussion, see the 16-Jan-10 News - Greece and Portugal head for financial crisis. thread of the Generational Dynamics forum. Comments may be posted anonymously.) (16-Jan-2010) Permanent Link
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Generational Dynamics Web Log for 16-Jan-2010 16-Jan-10 News - Greece and Portugal head for financial crisis

Europeans turn more hostile over Greece's budget deficit

Moody's: Greece and Portugal face a 'slow death'

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Generational Dynamics Web Log for 16-Jan-2010
16-Jan-10 News - Greece and Portugal head for financial crisis