Time Is Running Short

Europe is imploding fast

by Mark J. Grant

"It is only in silence that one hears the sounds of life."

                                                                                   -The Wizard

From time to time it is necessary to quietly sit down and assess where we are going. This is a significantly different undertaking than listening to those who try to tell us where we are going. Government and the Pastors of Propaganda are always whispering into our ears either offering Heaven or the retribution of Divine Providence so the removal of either from a deliberate consideration is a necessary part of the examination of reality.  

I bring a measure of experience to this task. Things that are not counted, liabilities that are excluded from national budgets or their debts, do not mean that they do not have to be paid. This, in fact, is Europe's greatest problem. They have played "extend and pretend." They have played "lie and deny." They have resorted to every trick imaginable when compiling data such as the debt to GDP ratios of the countries and yet; chicanery does not erase the debts.

The financial projections of the IMF, the EU and the ECB are never accurate or even close to accurate because they use garbage for their data. It is therefore "garbage in" and "garbage out" as they all make a mockery of themselves. The vast amount of investors continue to believe them as evidenced by the markets but certain events are now about to take place.

Greece reported out a -14.2% decline in just one month this morning for retail sales. Greek collapse III is almost at hand as their two major privatizations have failed and as their economy continues to worsen. Soon the Greeks will call for more money but the end of this road is in sight as I do not believe the nations in Europe are willing to roll over again. The IMF is also up against the wall and they have asked, I understand, for Europe to forgive part of the Greek debt which has fallen, so far, on deaf ears.

Soon, soon, the Iceman cometh.

The Cyprus solution is a failure. It is as clear and as simple as that. Cyprus will have $10.17 left in their banks by the end of the year. They will soon be back asking for more money and we will have another IMF problem and a Euro fiasco as the amount of money they have been given to date is akin to a flyswatter trying to smack down an F-14. A ridiculous incident in both cases.

The biggest problem though is going to be France. They have a stated debt to GDP ratio of 90.2%. This is another mockery of the data though as the real number, liabilities included, is somewhere around double this number or just below 200%. They also have an economy that, according to "Trading Economics," is expected to decline in the next quarter by -0.5% while their sovereign debt increases to $366.9 billion which is an increase of 9.5%. This is while their government spending rises 9.9% for the same time period. This, then not only puts them in violation of the EU's current mandates, which is a secondary consideration, but puts them clearly on the road to insolvency.

France has run out of road.

The real issue here is a question of politics. In France being rich is defiled. That is fine and dandy except this attitude leads to an inescapable end which is with a 75% tax rate, massive amounts of workers in the government, social programs that keep increasing, and no reason to be successful and thereby support the government; those with money are fleeing the country. The drain is enormous.

Consequently sovereign revenues cannot, by any stretch of the imagination, support the imbedded costs of the country which must either be drastically cut, think massive protests or where France shows up at the door of the EU asking for help, which would be a disaster for the European Union. I believe the country is at this crossroads now as their fiscal policy, regardless of politics, is just not sustainable.

Now the investors of the world are in another reality altogether. They do not want to hear anything about these sorts of things. They are in the state of, "ignore and deplore."

You can live there for a while. Government induced fantasies have occupied the center stage before and for some time. Our current denial of reality is fueled by all of the money that the central banks have pumped into the world but that will be diminishing as the Fed and others examine the longer term consequences of their actions. There are always consequences.

What has been put off will arrive. It was always just a matter of time.

Time is running short.