Looming Debt Crisis

The following is a collection of links to news articles chronicling the world wide debt problem. The debt crisis (though not many will call it a crisis yet) is not unlike any other bubble. It grows bigger and bigger and there seems no way of unwinding it gently. Only way for it to go is to burst.




The U.S. Is Not Alone — Europe's in Debt Too
By Bruce Crumley / Paris Tuesday, Feb. 02, 2010

President Obama may have left jaws hanging with his proposed $3.8 trillion budget for the fiscal year 2011 — which forecasts a stunning $1.6 trillion deficit — but he's hardly the only member of the "spend now, pay later" club. Across Europe, governments have gotten so used to embracing debt during economically tight times such as these that some experts are starting to wonder if they will get back to viable deficit levels — much less balanced budgets — anytime soon.

The U.S. is clearly in a debt league of its own. Obama's proposed deficit, representing about 11% of gross domestic product, is part of a 10-year plan aimed at reducing the U.S. budget shortfall from its current level to a still hefty annual average of 3.6% if everything goes well. The deficit amounts may be less dizzying in Europe, but they're still a major cause of concern for fiscal purists who fear that some governments may end up drowning in red ink. Twenty of the European Union's 27 members are running deficits to ease their way through the global recession, with the average pegged at 7.5% this year. Three years ago, the E.U.'s deficit average was just 0.8% of the bloc's total GDP. That figure increased to 2.3% in 2008 and then spiked to 6.9% last year. ...................

Huge Deficits May Alter U.S. Politics and Global Power

By DAVID E. SANGER

Published: February 1, 2010

WASHINGTON — In a federal budget filled with mind-boggling statistics, two numbers stand out as particularly stunning, for the way they may change American politics and American power.

The first is the projected deficit in the coming year, nearly 11 percent of the country’s entire economic output. That is not unprecedented: During the Civil War, World War I and World War II, the United States ran soaring deficits, but usually with the expectation that they would come back down once peace was restored and war spending abated. ...............

Problems caused by over-borrowing are being 'solved' by more borrowing
Henry Thornton From: The Australian January 04, 2010 1:55PM

EXCESSIVE spending in Western nations was a major cause of the Crash of 2008.

Excessive borrowing by households and firms, excessive lending by banks and failed 'securitisation' of dud loans all were part of the global asset boom and subsequent asset bust.

Governments were quick to bail out the failed banks, except in the curious case of Lehman Brothers, where failure to effect a bailout almost brought down the global banking system.

Governments were also quick to apply Keynesian fiscal stimulus measures, financed by printing money or by incurring government debt, while central banks dramatically eased monetary policy.
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Eurozone debt crisis looms
WILLIAM ICKES, FRANKFURT
January 4, 2010

THE eurozone's new year heralds a debt crisis that has alarm bells ringing and markets tracking government plans to tame the growing shortfall.
Officials have borrowed heavily to pull the 16-nation zone out of its first recession, and debt levels are set to smash a huge hole in the ceiling set by the European Union in its Stability and Growth Pact. ......................


A blog article about the collapse of the US dollar
http://ozstock.blogspot.com/2009/12/on-catastrophic-collapse-of-dollar.html


An article about central bankers buying gold. Why? Because people in the know are losing faith in the US dollar as the international reserve currency.



Week greenback leads to bankers buying bullion
David Robertson From: The Australian December 31, 2009 12:00AM

THERE is little to beat the lure of gold, as many recipients of a lavish Christmas gift will confirm, but it is not only seasonal impetus that has put a new shine on the precious metal -- for the first time in 21 years the world's central banks have been net buyers.

World Gold Council data reveals that amid growing concern over the weakness of the dollar, about $US28 billion ($31.4bn) of bullion was bought by central banks this year, based on an average price of $US978 an ounce. ......................