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Financial Panic Sweeps Europe As The Head Of The IMF Warns Of A “1930s Depression”

Are we on the verge of another Great Depression?  Christian Lagarde, the head of the IMF, said this week that if dramatic action is not taken immediately we could actually see conditions “reminiscent of the 1930s depression” and that no country on earth “will be immune to the crisis”.  Right now, financial panic is sweeping across Europe, but most Americans are not too concerned about it because they simply don’t understand how important the EU is.  The truth is that the EU has a much larger population than the United States does.  The EU has an economy that is nearly as large as the economies of the United States and China combined.  The EU has more Fortune 500 companies that the United States does, and the banking system of Europe is substantially larger than the banking system of the United States.  Anyone out there that believes that a massive financial collapse in Europe would not dramatically affect the rest of the globe is being delusional.  The European debt crisis is one of the biggest stories that we have seen in a long, long time and the coming financial meltdown is going to permanently change the global economy.

So far, politicians in Europe have held 19 high-level emergency meetings in an attempt to solve this crisis.

All of their efforts have failed.

Right now, this is the situation in Europe….

-Most EU governments are drowning in toxic levels of debt

-Bond yields have risen dramatically this year and this has caused borrowing costs for most EU members to soar

-In an attempt to get debt under control, governments all over Europe are implementing brutal austerity measures and this is causing European economies to slow down substantially

-There is a tremendous lack of confidence in the European financial system at this point and this is causing a massive credit crunch

-The credit crunch is causing the money supply to drop significantly in almost every nation in the EU

-Major banks all over Europe are massively overleveraged and are on the verge of failing

This is all so similar to what we saw back during the early 1930s.

In fact, things have gotten so bad that prominent world leaders are now using apocalyptic language when describing the situation in Europe.

Just check out what the head of the International Monetary Fund, Christine Lagarde, recently said about Europe.  Speaking at a State Department conference in Washington D.C. this week, Lagarde made the following very shocking statements….

*“The world economic outlook at the moment is not particularly rosy. It is quite gloomy”

*“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating”

*“It is not a crisis that will be resolved by one group of countries taking action. It is going to be hopefully resolved by all countries, all regions, all categories of countries actually taking action.”

*“No country or region is immune. All must take action to boost growth. Work must start in the eurozone countries and must continue relentlessly. The risks of inaction include protectionism, isolation and other elements reminiscent of the 1930s depression.”

*“This is exactly the description of what happened in the 1930s, and what followed is not something we are looking forward to.”

But didn’t the politicians in Europe recently reach a deal which was supposed to fix all this?

Well, unfortunately the deal basically did nothing to fix the underlying financial problems that Europe is facing.

In fact, global financial markets seem entirely unimpressed by this recent deal.  A recent article by Professor Peter Morici detailed some of the problems with the deal….

Investors are rejecting the euro deal, because the agreement does not effectively meet the funding needs of Italy and other Mediterranean governments, address the weak balance sheets of European commercial banks, or fix the underlying structural flaws in the euro architecture.

The €440 billion European Financial Stability Facility is providing short-term funding—guaranteed by 17 Eurozone member states as a whole—to tide over the more troubled governments.

However, those bailouts impose huge cuts in spending and tax increases. Coupled with austerity plans also adopted by France and other healthier European states, those packages are pushing Europe into a recession that could last several years.

What is even worse is that there are signs that this recent deal is already unraveling.  Some EU nations have decided that they are not sure that they want to go along with the program.

The following comes from a recent article in the Telegraph….

Amid fresh warnings that Europe is triggering a 1930s-style global depression, the German chancellor faced open rebellion against the key plank of her Brussels accord. The leaders of Hungary and the Czech Republic told a joint conference in Budapest they were ready to reject the planned treaty changes and implied move towards a centralised tax system. Czech prime minister Petr Necas said he was “convinced that tax harmonisation would not mean anything good for us”.

In Poland, we are actually seeing people march in the streets to protest against this new agreement….

Poles marched under banners that read: “We want sovereignty, not the euro.” They were protesting against the Brussels deal that could see EU countries, including those outside the eurozone, face penalties for breaking tough centralised spending laws.

So not only does this new deal not address the fundamental problems that Europe is facing, there is also a tremendous amount of doubt about whether or not it will eventually be approved.

Meanwhile, the brutal austerity measures that are being implemented all over Europe are pushing many EU nations into recession.

The EU (led by Germany and France) and the IMF have been pushing financially troubled nations all over Europe to make incredibly deep budget cuts.  But these very deep budget cuts have had a devastating economic impact.

In a recent article, I discussed how brutal austerity measures have already pushed the economy of Greece into a full-blown depression….

Just look at what happened to Greece.  Greece was forced to raise taxes and implement brutal austerity measures.  That caused the economy to slow down and tax revenues to decline and so government debt figures did not improve as much as anticipated.  So Greece was forced to implement even more brutal austerity measures.  Well, that caused the economy to slow down even more and tax revenues declined again.  In Greece this cycle has been repeated several times and now Greece is experiencing a full-blown economic depression.  100,000 businesses have closed and a third of the population is living in poverty.  But now Germany and France intend to impose the “Greek solution” on the rest of Europe.

Right now, the flow of government money is drying up all over Europe and so is the flow of money from the banks.  European banks are shrinking their balance sheets and have dramatically cut back on lending in order to meet new capital requirements that are being imposed upon them.

All of this has created an environment where there is not much credit flowing in Europe at all.  When there is a credit crunch of this magnitude, it causes the money supply to start to shrink.  This is already happening all over Europe as a recent article in the Telegraph noted….

All key measures of the money supply in the eurozone contracted in October with drastic falls across parts of southern Europe, raising the risk of severe recession over coming months.

Right now, we are seeing the money supply in each of the “PIIGS” nations fall at a staggering rate.  The following comes from the same Telegraph article referenced above….

Simon Ward from Henderson Global Investors said “narrow” M1 money – which includes cash and overnight deposits, and signals short-term spending plans – shows an alarming split between North and South.

While real M1 deposits are still holding up in the German bloc, the rate of fall over the last six months (annualised) has been 20.7pc in Greece, 16.3pc in Portugal, 11.8pc in Ireland, and 8.1pc in Spain, and 6.7pc in Italy. The pace of decline in Italy has been accelerating, partly due to capital flight. “This rate of contraction is greater than in early 2008 and implies an even deeper recession, both for Italy and the whole periphery,” said Mr Ward.

Those numbers scream “Recession, Recession, Recession“.

There may be one glimmer of hope on the horizon.  The Federal Reserve has been lending huge amounts of money to the European Central Bank and the European Central Bank has been lending that money out to European banks.  In turn, the European banks have been using much of that money to buy up European government bonds.  It is a massive Ponzi scheme, but it has stabilized bond yields in Europe for now.  This scheme was described in a recent article by Simone Foxman….

That’s because the European Central Bank may have already introduced roundabout measures that will solve some of Europe’s big problems—it’s making investing in peripheral sovereign debt a huge profit opportunity for banks.

Theoretically, financial institutions will be able coin money by borrowing ultra-cheap from the ECB and buying higher yielding sovereign debt.

Essentially, it appears the ECB might allow European banks to pledge everything but the kitchen sink in return for funds. First, the new policy allows European banks to hold far fewer assets as collateral in exchange for funding from the ECB—freeing up liquidity to the tune of €103 billion ($134 billion). More importantly, relaxing collateral restrictions could also allow European banks to use even somewhat risky sovereign assets as collateral for bond purchases.

But this Ponzi scheme cannot go on indefinitely.  A lot of European banks are already starting to run out of collateral for these loans as one Australian news source recently explained….

“If anyone thinks things are getting better, they simply don’t understand how severe the problems are,” a London executive at a global bank said. “A major bank could fail within weeks.”

Others said many continental banks, including French, Italian and Spanish lenders, were close to running out of the acceptable forms of collateral, such as US Treasury bonds, that could be used to finance short-term loans.

Some have been forced to lend out their gold reserves to maintain access to US dollar funding.

So will the European Central Bank keep lending them money once they are out of collateral?

If they do, the ECB itself could potentially be in a great deal of danger.

The truth is that the ECB is already playing with fire.  So far, the European Central Bank has spent over 274 billion dollars buying up European government bonds in an attempt to keep bond yields down.

How many toxic assets can the ECB buy up before they get into real trouble?

That is a very interesting question.

Meanwhile, the rest of the world is becoming increasingly concerned about the financial panic that is sweeping Europe.

For example, Australian banks have been given one week to perform a stress test that evaluates their ability to survive in the event of a European financial collapse.

Why all the urgency?

Do they know something that we don’t?

Just like back in 2008, we are seeing massive problems at some of the largest banks in the world.

On Thursday, Fitch Ratings downgraded a whole bunch of the world’s most prominent banks….

The banks included Bank of America, Morgan Stanley and Goldman Sachs, as well as Europe’s Barclays, Societe Generale and BNP Paribas.

Germany’s Deutsche Bank and Switerzland’s Credit Suisse were also downgraded.

The global banking system is a giant house of cards.  There is simply way too much debt, way too much leverage and way too much risk.

On average, major banks across Europe are leveraged 26 to 1.

If the value of the assets held by those banks declines by just 4 percent, they will be wiped out.

Yes, that is how serious things are.

And already we are starting to see major banks fail in Europe.

This week it was revealed that Germany’s second largest bank is going to need a bailout.  The following comes from a Sky News report….

Germany’s second largest bank, Commerzbank, is reportedly in discussions with the German government about a bailout after regulators said it needed to raise more money to cope with a potential default on its loans to governments.

“Intense talks” have been going on for several days, according to sources who spoke to the news agency Reuters.

So if Germany’s second largest bank is failing, are any banks in Europe safe?

Just like we saw back during the 1930s, we are starting to see a run on banks all over Europe.

In fact, according to a recent Der Spiegel article, a run on Greek banks has been going on for a while now and is rapidly accelerating….

He means that the outflow of funds from Greek bank accounts has been accelerating rapidly. At the start of 2010, savings and time deposits held by private households in Greece totalled €237.7 billion — by the end of 2011, they had fallen by €49 billion. Since then, the decline has been gaining momentum. Savings fell by a further €5.4 billion in September and by an estimated €8.5 billion in October — the biggest monthly outflow of funds since the start of the debt crisis in late 2009.

If you can believe it, approximately 20 percent of all bank deposits in Greece have been withdrawn since the start of 2011.

Europe is in a massive amount of trouble.  The euro is dropping like a rock and the European financial system is paralyzed by panic and fear.

It is going to take a miracle to prevent a massive financial collapse from happening in Europe in 2012.

Unfortunately, there do not appear to be any miracles for Europe on the horizon.

  • A Dodgy Bloke

    I agree with you when the EU implodes (notice I didn’t say if) it will affect every major nation on the planet. Japan with a debt to GDP north of 200% will watch it markets dry up, just as the Japanese People are with drawing saving due to retirement. China will watch it markets dry up, just as its real-estate bubble is popping. With Russia primarily dependent on selling natural resources, as is Australia. This could daisy chain all over the world. US banks have major exposure to European banks some US banks might fail in the process. I fear the end game is near much sooner then I thought!

  • http://www.TotalCollapse.com TotalCollapse.com

    C’mon Baby, Gimme One More Chance… 2012 = Total Collapse… Wake Up America, or lose everything!

    http://totalcollapse.com/2011/12/16/cmon-baby-gimme-one-more-chance/

  • http://suicide-pact.blogspot.com/ Max Narovlyansky

    A very thoughtful article, with lots of specifics. I was particularly impressed by the high average of levarging. That’s scary.

    I’d like to try to asnwer Tatiana’s question:

    The banking and big government are corrupt, and in bed with each other. We cannot an honest banking system, without purifying the political leadership.

    EU needs an orderly break-up, while it can still have one.

    • DB200

      When break-up happens, there is a possibility that war is to follow because the blame game will start directly. Did you ever see a politician who didn’t blame other politicians for messy problems but accepted full responsibility?

      A break-up will lead to a huge “bill” that has to be paid directly while the other options are more or less equal to “expend and pretend, delay and pray”.

      • DB200

        Small typo, I meant: “extend and pretend, delay and pray”.

  • http://www.TotalCollapse.com TotalCollapse.com

    The Wreck of the Edmund Fitzgerald… AKA… Global Economy… grab the white ring…( silver )… save yourself…while you still can…

    http://totalcollapse.com/2011/12/16/the-wreck-of-the-edmund-fitzgerald-aka-global-economy-grab-the-white-ring-silver-save-yourself-while-you-can-nobody-else-will/

  • Gary2

    Let the banks fail. To big to fail=too big to exist. Make the rich bond holders fail. F the rich time to bail out the poor.

    • Ozmo

      Gary,

      I agree with you about letting big banks fail, but in letting that happen I think it might help the poor. Just a thought.

    • DB200

      “Make the rich bond holders fail.” Sorry for us tax payers, but it won’t happen. The IMF is involved and the IMF is extremely bond holder friendly.

    • DB200

      The head of the International Monetary Fund, Christine Lagarde, was French minister of Finance in her former job. At that time she was saying completely other things about the same situation. Apparently, the job you have determines what you say, not the situation as is.

      She maybe right, but then again, she may be not. All parties involved have their own political agenda.

  • http://www.TotalCollapse.com TotalCollapse.com
  • mark

    You can’t fix a debt problem with more debt. this is a very simple statement, but it is true. There is no fix for this problem. Either we taxerpayers become debt slaves or the owners of the debt take massive hair cuts. If the owners of the debt take the haircuts pension funds will take major hits along with the 1% and many retired folks. If we restructure the debt the long term interest payments will be a never ending monkey on the backs of the taxpayers. If governments default on the debt, they should never be allowed to borrow again. That might be a good out come of this collaspe if we were to learn from it, but we never seem to. Some say we can print our way out of it or raise taxes. This will not fix anything since the debt problem is based on governments spending too much of GDP. We have created a sociaty that is dependent on government handouts. Handouts can be welfare or interest payments on bonds. Interest payments on government bonds allow capital to be parked and suck the life out of the middle class as their tax dollars pay banks on the carry trade. Michael is right about tossing out the Fed and a least not paying interest to banks for the right to print our own money. Printing money without something to back it up is dumb, but it is real stupid to print and pay interest to do it. It seems that our expectations of high growth to live the high life have come back to bite us in the butt.

    • Kevin

      mark

      Do not underestimate the private debt component in all of this.

      My bet is government will take the easy way “out” or actually delay with a QE3, 4 ….to who knows. The Fed will “buy” Treasuries, the USD (and the rest of the fiat currencies) will devalue and everyones standard of living will drop.

      If the above is done methodically and as slowly as possible mass kayos MAY be everted. This is the best case but not the most likely one. If we’re very lucky we get a 30-40% drop in standard of living.

  • Ulrick

    “Europe is in a massive amount of trouble. The euro is dropping like a rock”

    The Euro is dropping because of the anglo-financial agencies attacks but it’s still a strong currency compare to the dollar and will remain a strong currency.

    I said it already. A financial meltdown in the Eurozone will make more trouble in America than in Europe, because the UE wealth and economy are not exclusively based on finances like they are in the US and in the UK.

  • mondobeyondo

    “Happy days are here again
    The skies above are clear again
    Let us sing a song of cheer again
    Happy days are here again…”

    “Prosperity is just around the corner…” – Herbert Hoover
    “Two chickens in every pot…” – Herbert Hoover

    Yaaay! Don’t you feel better now? I don’t. Sorry, it didn’t work for me.

    • DB200

      “Live now, pay later” worked for a lot of people in the roaring twenties as they paid dearly in the thirties.

      Same is going to happen the coming decade. They should have listened to their grandparents and their history teacher at high school.

  • mondobeyondo

    Yikes!!
    Reduced money supply (deflation)… not good.
    Increased money supply (inflation)… not good either.

    The 1930′s Depression was a deflationary depression. Prices for goods and services dropped, which sounds nice. BUT – people had no money to buy basic necessities.

    This time around, it’s likely to be a hyperinflationary depression. You’ll have money, but it will be worthless. You may feel wealthy right now, with $10,000 in your 401(k) or whatever – until you go to the grocery store and see that bread is now $12,000 a loaf.

    • DB200

      Deflation is only bad when you are a debtor. I personally would love to have deflation, the more the better. I would also be very good news for retired people.

  • http://lastdayrapture.blogspot.com/ TK

    Wow, this is serious stuff! There are several scenarios that are coming to mind:

    #1) Print like there is no tomorrow (inflation will follow)

    #2) More austerity and taxes followed by more recession

    #3) More loans from the Fed, just kick the can down the road

    or a combination of all 3 above. Either way, this is a great opportunity for banks to continue to show their power over the general populace by making the peasants suffer through austerity and taxes.

    Soon America will see austerity and taxes unless we can elect a President that will get rid of the debt based monetary system we are living under. Ron Paul 2012!

  • NWO Alert

    CONNECT THE DOTS:

    From Lindsey Williams

    The Elite want to create debt in America and every country of the world.

    The Elite are buying the bonds of Greece so they will own the country when Greece defaults.

    The Elite are allowing California and other states to get in the most horrible state, so when they default, the Elite will own and control them.

    All the bailouts are done intentionally to force a default where the Elite will fully control them.

    From Money and Markets

    Chancellor Angela Merkel’s cabinet just agreed that a state-backed bank rescue fund should be reinstated. And it will allow the state to FORCE banks to accept aid if they feel it’s necessary.

    German officials already have the first target for a bank bailout in their sights: Commerzbank, Germany’s second-largest bank by assets!

    Think about it: The supposedly STRONGEST nation in Europe is quietly planning bailout provisions for its second-largest bank. Can you imagine what that means for other European nations and their banks? Or how quickly the problems could arrive on American shores?

  • Bobby

    if you really want to know what’s going on google or visit http://www.thewarningsecondcoming.com/home/
    It is the hand of the Lord dealing the fatal blow to Satan and his buddies conspiracy to commit.
    Forewarned is forearmed… and you better start praying.

    • Man of clay

      AMEN

  • http://‘IndefiniteDetention’BillPassesSenate93-7 Antoninus_PIUS

    The new world order of Vatican is coming after the ww3

  • http://goto.glocalnet.net/pdn/ Perdavid Nygren

    NESARA (National Economic Stabilization and Recovery Act). “Beloved Saint Germain” and “Saint Sananda Immanuel” (Omegans) will help you get your stamp on your forehead or hand. They WILL fix all economic trouble! They are playing “enemy of Illuminati”. Wow this was a crazy comment, no?

  • Cinderella Man

    Thank you Michael for making sense of this catastrophe that is staring this country right in the face. Sometimes its hard to keep a positive attitude when it feels like the whole house of cards is coming apart. I try to tell friends and family to get ready for this storm, and most of the time they have a blank look on their face. From the Euro collapse to the NDAA being passed our country sure has its hands full right now. I donated to Ron Paul’s campagain on Friday because after that last debate, he looks like our only hope. Nothing but warmongering pandering to Israel at the expense of our country’s blood and treasure. Im tired of seeing my veteran friends coming back from the warzones either physically or emotionally damaged and they cant even get a job, or they are looked at like they’re dangerous by our govt. I think Americans are generally a tolerant people, however there is a limit to the amount of suffering we are going to take. The last Great Depression people were kind and compassionate towards each other, and brought out the best in ourselves. I fear what people will do when the austerity begins and the real pain starts. Its not gonna be pretty. It will be every man or woman for themselves. I pray all the time for the survival of this nation, but now im begininng to think that maybe the collapse could be the best thing for this country. After all, if the govt. runs out of money, maybe they will run out of funding for their perpetual war machines and FEMA camps. Help me ObiRon, youre my only hope!!! RON PAUL 2012!!! IF HE DOSENT GET THE NOMINATION, WRITE HIM IN!!! IF IT CAN WORK FOR ALASKA IT WILL WORK FOR US, DO YOUR PART TO DEFEAT THE NWO/DARK SIDE OF THE FORCE!!!!

  • http://www.TotalCollapse.com TotalCollapse.com

    Graphic Video: EGYPT, The brave women of the Middle East: Female protesters brutally beaten with metal poles as vicious soldiers drag girls through streets by their hair in day of shame…

    http://totalcollapse.com/2011/12/18/graphic-video-egypt-the-brave-women-of-the-middle-east-female-protesters-brutally-beaten-with-metal-poles-as-vicious-soldiers-drag-girls-through-streets-by-their-hair-in-day-of-shame/

  • http://fotozine.eu Rae Merrill

    They haven’t built FEMA camps for nothing. I reckon in the New Year you’re going to see things begin to happen in earnest. Banks will collapse and depositors are going to see savings evaporate. Retirement age will be extended to 80 in most countries. Most wont see a return from their pension contributions before death. This is the New World Order we keep hearing about and what they have in store we haven’t even seen yet.

  • http://www.TotalCollapse.com TotalCollapse.com
    • mondobeyondo

      I’ll try very hard to refrain from making jokes about the late Kimberly Jong Il (sorry, I couldn’t help it!)

      But it is indeed cause for concern. Kim Jong-Un (exact age unknown, but he’s pretty young) apparently is going to run the country. We don’t know much about this guy. Is he a party dude? Does he have a crush on Kim Kardashian? Is he Hitler Lite? And he’s about to take the helm of a country that has nukes, and where many people are starving.

      Soooo… may we live in interesting times…ahem.

  • ctd

    There is nothing that we can do because the people create this mess. This time the filtration between the good the bad and the ugly and the earth had been doing this so many times. Population is over crowded too many Bad human on earth there is less and less of beliver in God, so it is the time to remove all bad people and we will have the clear skies again with all good human who believe in God.

  • http://www.TotalCollapse.com TotalCollapse.com

    Stocking Up For Doomsday: It’s Not Just For “Crazies” Anymore…

    http://totalcollapse.com/2011/12/19/stocking-up-for-doomsday-its-not-just-for-crazies-anymore/

  • Underscore

    ctd, with comments like that you strike me as one of the bad people.

  • Man with no name

    Nothing new here – Celente has been saying this for how long now ? And he’s right too – it’s all played out pretty much exactly how, where and when he said it would.
    Now we are maybe a few weeks away from the EU going down HARD.
    The whole world will crash and burn when the EU/GB go down, followed by USS of A, then China and emerging countries, then Australia etc.
    A 1930′s depression would be pleasant in comparison, as the world has debt instruments that didn’t exist back then multiplying the level of severity of the coming collapse. Your modern greed and credit driven lifestyles are your undoing people…
    No-one’s safe anywhere and if people haven’t been planning for this event long ago and ready for it, say goodbye to your state of ignorance, as life is about to serve you up a big plate of reality. It’s going to be cold and taste horrible.

  • Glungin

    At worst, the current economic implosion will lead to a global police state followed by World War III. At best, more sane political/ financial systems will emerge from the rubble when the one mentioned in this article goes down.

  • http://www.hotbedinfo.com KT

    Yup, it’s coming here to the U.S. as well.

    —Top 50 Unbelievable Economic Numbers from 2011

    http://hotbedinfo.com/2011/12/50-economic-numbers-from-2011-that-are-almost-too-crazy-to-believe/

  • http://stopneocons.bravejournal.com Winston Smith

    Some of these nations willing joined the EU for the freebies.All of these nations have elected leaders…….not feeling sorry for them, likely there, like here, politicians get re-elected 85% of the time…..plus the “god” democracy reigns in these nations, like the USA, so, not crying too much for them….when things get bad, maybe then, people will wake up, though, if history is a teacher, they will go into the arms of the next Hitler/Stalin types….