Greece, Ireland, Portugal, Italy, Belgium, Spain... but is there more to worry about?

Following on from my last piece, I have somewhat less humorous news about EU debt. The consensus view is that the EU countries that are in real trouble and have or will soon have to ask for (or have forced upon them) bail-outs are Greece, Ireland, Portugal, Italy, Belgium and Spain; but is there more to worry about? Yes the UK is often mooted as next in line but what about Germany? Germany's debt problems were not too large but these bail-outs might be an issue for them. As The Telegraph reports:

'Credit default swaps (CDS) measuring risk on German, French and Dutch bonds have surged over recent days, rising significantly above the levels of non-EMU states in Scandinavia.

"Germany cannot keep paying for bail-outs without going bankrupt itself," said Professor Wilhelm Hankel, of Frankfurt University. "This is frightening people. You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings."

The refrain was picked up this week by German finance minister Wolfgang Schäuble. "We're not swimming in money, we're drowning in debts," he told the Bundestag.

While Germany's public and private debt is not extreme, it is very high for a country on the cusp of an acute ageing crisis. Adjusted for demographics, Germany is already one of the most indebted nations in the world.

Reports that EU officials are hatching plans to double the size of EU's €440bn (£373bn) rescue mechanism have inevitably caused outrage in Germany. Brussels has denied the claims, but the story has refused to die precisely because markets know the European Financial Stability Facility (EFSF) cannot cope with the all too possible event of a triple bail-out for Ireland, Portugal and Spain. '

Read the whole piece and ask yourselves how on earth do we all get out of this mess? I really don't see a way, it looks like doom and disaster all the way to me.

The real global disaster that awaits us in 2012?

Scary - yes, possible - yes, likely - ?
How would the UK be affected?
How to prepare? Buy gold, silver, a generator and long life food - or just ignore it like most politicians.

Yes I know this video is from the National Inflation Association but how sure are you really that it won't come true?

Thanks to Theo Spark for the spot.

'Spain is fundamentally ugly' - Is it time to really panic yet?

'Spain is fundamentally ugly. That’s why Spain’s five year credit default swaps have risen from under 100 basis points at the start of the year to over 300 bps now. Remember, Irish CDS started 2010 at 150 bps, pushed up to 200 bps mid-summer and recently hit 600 bps as the country teetered on the verge of bankruptcy.
But unlike Ireland, Greece and Portugal, Spain really is too big to rescue. Spain’s banking sector assets of nearly €3.5 trillion are almost €1 trillion more than three other countries’ combined.'

More at The Wall Street Journal but it's not a reassuring read...

"The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost."

"The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost."

That's an extract from s speech given eight years ago by Ben Bernanke then the new governor of the Federal Reserve. Read this article by The Telegraph's Ambrose Evans-Pritchard and see if you think the money printing presses are about to roll again...:

'Clearly we are nearing the end of the "Phoney War", that phase of the global crisis when it seemed as if governments could conjure away the Great Debt. The trauma has merely been displaced from banks, auto makers, and homeowners onto the taxpayer, lifting public debt in the OECD bloc from 70pc of GDP to 100pc by next year. As the Bank for International Settlements warns, sovereign debt crises are nearing "boiling point" in half the world economy.

...

Bernanke warned in that speech eight years ago that "sustained deflation can be highly destructive to a modern economy" because it leads to slow death from a rising real burden of debt.

At the time, the broad money supply war growing at 6pc and the Dallas Fed's `trimmed mean' index of core inflation was 2.2pc.

We are much nearer the tipping today. The M3 money supply has contracted by 5.5pc over the last year, and the pace is accelerating: the 'trimmed mean' index is now 0.6pc on a six-month basis, the lowest ever. America is one twist shy of a debt-deflation trap.

There is no doubt that the Fed has the tools to stop this. "Sufficient injections of money will ultimately always reverse a deflation," said Bernanke. The question is whether he can muster support for such action in the face of massive popular disgust, a Republican Fronde in Congress, and resistance from the liquidationsists at the Kansas, Philadelphia, and Richmond Feds. If he cannot, we are in grave trouble. '

How screwed is the US economy?

The Guardian reports that:

"In a new "Bottom Rung" list, credit ratings agency Moody's names 283 American companies that it says may file for insolvency in the medium term.

"Tight credit markets and the global economic downturn are rapidly swelling the population of US companies with [a] high default risk and weak liquidity," Moody's said in its report.

The list, which will be updated quarterly, names the firms that are the most likely to have difficulties paying their debts. Just 157 companies would have made the list if it had been compiled last year, Moody's said."

Among those named are

"US industrial companies such as Eastman Kodak, media firms such as Univision Communications and carmakers including Ford and General Motors have a 45% chance of going bust in the next 12 months"

And here is the payoff, and if this doesn't scare you what will...

"The global default rate among speculative-grade (lower-rated) companies is expected to soar to 14.8% by the end of this year, compared with 5.2% at the end of February, according to Moody's.

At present, most defaults are in the US, because the recession hit the country before Europe, following the collapse of the sub-prime mortgage market. Of the 17 defaults in February, 13 were in the US, two in Brazil and one each in Denmark and Ukraine.

In Europe, however, the recession is expected to lift the speculative-grade default rate to 22.5% by the end of this year, from 2.7% at the end of February."