The Condition of The Global Financial System

Monty Pelerin ~ EconomicNoise.com

Regarding the world economy, no one knows with certainty whether the fecal matter will hit the big air-moving machine. The probabilities increase by the day as debt burdens and economies around the world continue to deteriorate.

Europe is looking especially dicey, in spite of the recent bravado from Mario Draghi. Bravado is all that is left in his ammo pouch. When you alter results, pretend you can and will. Make promises and cheerlead when that is all that is left.

Mr. Draghi’s recent speech was unusually bold but typically without details. His boldness suggests that matters must truly be getting serious. Detail was replaced by “whatever it takes.” There is no plan, nor is there a way out.

Economic conditions around the world are getting to dangerous points. The Economic Collapse details some of the negative signs for the global financial system:

The following are 11 more signs that time is quickly running out for the global financial system….

#1 A number of very important events regarding the financial future of Europe are going to happen in the month of September. The following is from a recent Reuters article that detailed many of the key things that are currently slated to occur during that month….

In that month a German court makes a ruling that could neuter the new euro zone rescue fund, the anti-bailout Dutch vote in elections just as Greece tries to renegotiate its financial lifeline, and decisions need to be made on whether taxpayers suffer huge losses on state loans to Athens.

On top of that, the euro zone has to figure out how to help its next wobbling dominoes, Spain and Italy – or what do if one or both were to topple.

#2 Reuters is reporting that Spanish Economy Minister Luis de Guindos has suggested that Spain may need a 300 billion euro bailout.

#3 Spain continues to slide deeper into recession. The Spanish economy contracted 0.4 percent during the second quarter of 2012 after contracting 0.3 percent during the first quarter.

#4 The unemployment rate in Spain is now up to 24.6 percent.

#5 According to the Wall Street Journal, a new 30 billion euro hole has been discovered in the financial rescue plan for Greece.

#6 Morgan Stanley is projecting that the unemployment rate in Greece will exceed 25 percent in 2013.

#7 It is now being projected that the Greek economy will shrink by a total of 7 percent during 2012.

#8 German Finance Minister Wolfgang Schäuble says that the rest of Europe will not be making any more concessions for Greece.

#9 The UK economy has now plunged into a deep recession. During the second quarter of 2012 alone, the UK economy contracted by 0.7 percent.

#10 The Dallas Fed index of general business activity fell dramatically to -13.2 in July. This was a huge surprise and it is yet another indication that the U.S. economy is rapidly heading into a recession.

#11 As I have written about previously, a banking crisis is more likely to happen in the fall than at any other time during the year. The global financial system will enter a “danger zone” starting in September, and none of us need to be reminded that the crashes of 1929, 1987 and 2008 all happened during the second half of the year.