What is happening in Europe?

by Frank 14. December 2011 13:25

The following Morningstar article is worth reading because it is an excellent and timely analysis of the real problem and the EU’s total failure to do anything as well as its total inability to solve the problems of the European Union.


Basically, hundreds of billions of Euros in rescue funds but trillions of Euros of debt plus shrinking economies means the problem gets worse every day and can’t be solved other than by default which will bankrupt most of the major European banks. The tax revenues of European governments are falling far faster than their ability to cut costs. The longer they screw around with crisis summits and talkfests the bigger the problem becomes and the harder it will be to solve.

The European Union is finished and so is the Euro (an economically stupid and irrational idea to begin with; ignoring all the rules of currency valuations) – everything you see from the EU is just stalling and obfuscation in an attempt to keep the wolves at bay.

Europe will stagger along and sink lower and lower and end up with massive unemployment, over 25%, and deflation for at least the next 10 years.

My prediction is that Germany and France will negotiate a ‘deal’ that will screw all the weaker countries but try to protect Germany and France. It has already begun with the proposed changes pushed by Sarkozy and Merkel and rejected and vetoed by Cameron of the UK (he had no choice) – That’s why Sarkozy and Merkel are so mad at him; their plan wasn’t a rescue plan for Europe, it was a rescue plan for Germany and France at the expense of everyone else but the other European nations are both too stupid and too reliant on Germany and France to object.

Ergo, don’t rush out and buy a holiday home in Europe yet – much lower prices will follow soon but so will the massive social unrest that always comes with unemployment rates above 20% (which we are already seeing in countries like Greece and Portugal).

Australia is still the safest place to be because we are small and close to Asia and have lots of stuff Asia will want even with a slowdown in China and India. For once our isolation is a blessing as is living on the oldest continent on earth with all the mountains worn down and all those minerals close to the surface. The Chinese and Indian economies will continue to grow albeit more slowly (like 5% instead of 10% per year) because of their huge and rapidly growing populations.

Our biggest danger is our current government which is doing everything in its power to screw our mining industry and soon, every industry that is successful. I predict the next stupid thing they will try is a super profits tax on all industries (including banking) not just mining.

All the signals are flashing in the sky like a New Years’ fireworks show on Sydney Harbour. They are telling us to cut our costs and rein in spending before it is too late or we will end up in the same downward spiral as the European Union.  The time to begin was yesterday, not tomorrow.

However, just as in Europe, our politicians prefer to talk and spin and obfuscate and delay doing anything other than raise taxes and in doing so depress an already slowing economy. I think the only way to wake them up is by forcing another Federal election. Let the people have their say before it is way, way too late.

Message to Wayne Swann, the world’s greatest treasurer, “Wayne, just in case Treasury has not informed you, no one in history has ever taxed an economy out of a recession.”

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