Look what lies ahead in 2010 and 2011.

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Riots will return to Athens, with much greater force and intensity, and spread across Europe. But the spillover of emotions will lead to much bigger events. The momentum of Spanish and Greek defaults will kill the European Monetary Union, and thus the EU itself. The re-emergence of the Deutsche Mark is assured, except it will be called a variant of the Euro. The codenames to date are the Core Euro or the Nordic Euro. It will become the official currency of Germany and certain stronger Central Europe nations with a trade surplus.

http://www.financialsense.com/fsu/editorials/willie/2009/1215.html
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Long article but, due to the impact it could have on the overall financial system we are part of, it is worth the time to read. Even if only a small part of what he writes comes true, it is will be significant and also exposes the house of cards so many developed nations are built on, including us.

Things are not getting better here. They are being masked by government spending that increases the risks to the dollar, our debt and ability to pay interest once rates start up. Cities and states, I believe are more of a problem than many realize. Often they have to match federal funds for programs that help people or build infrastructure and they don’t have the funds needed to care for people and create jobs in construction.

We are in the eye of the storm for foreclosures too. This charts tells us where we are.

Look what lies ahead in 2010 and 2011. The reasons banks aren’t lending include the write downs yet to come. They are building up reserves to cover them. If they don’t, the write downs would cause them to fall below reserve requirements. This same thing happened in the 30’s where banks built up extra reserves as a precaution against more potential damage to their balance sheets.

Always remember this is not a “inventory recession” like all since WW II but a credit expansion collapse like the 20’s turned into in the 30’s. It won’t play out the same but the cause is the same. Too much debt at all levels of our society.

- JanPaul

Related Posts:

• The Federal Reserve is reported in several articles to have said in one of their meetings, “No net new jobs for 5 years.”
• This IS NOT an inventory recession, this IS a credit recession, LIKE 1930’s.
• Bloomberg Radio just interviewed Bob Shiller. Mr. Shiller stated “Prices still have a long way to fall”.
• The President was right that this is the result of decades of mistakes.
• Even the Government site reports U-6 at 13.5% and if you counted it the way the did during the 30’s it is closer to 18%

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