Economic Collapse Round 2 – Almost Ready!

| March 1, 2009

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I have been warning now for several weeks that the second big round of financial stress has been gathering strength, carefully picking it’s time to emerge and unfold.

This week the European Union will hold a summit to try and chart a course out of the death spiral that many EU member nations now find themselves in.

The signs of stress are everywhere, but this latest comes to us from the New York Times:

The leaders of the European Union gathered Sunday in Brussels for an emergency summit meeting designed to tamp down the centrifugal forces unleashed by the global economic crisis that threaten to spin the bloc – and its single currency – apart.

Prime Minister Ferenc Gyurcsany of Hungary warned of “a new Iron Curtain” dividing Europe, even if the metal today was gold. He called for a special EU fund of up to €190 billion, or $241 billion, to protect the bloc’s weakest members.

The Euro has lasted this long because it had enjoyed more than a decade of favorable economic winds. Now that the credit bubble is deflating, the true stresses of trying to slap so many incompatible economies together will finally be seen.

There are growing tensions between the haves (Germany and friends) and the have-nots (former eastern block countries like Hungary) that could hasten the collapse of some of the weaker economies and their governments. Just look to what happened in Iceland in late 2008 as an example of how this kind of problem matures.

These collapses will be followed by local rabble rousers and “community organizers” blaming the big bad rich countries for causing all these problems. At best this could lead to a new era of nationalism, and at worst armed conflict between nations.

At present Ireland is searching for some exit strategy that does not leave it penniless, while banks in central and eastern europe are lining up to get a piece of a $31 billion dollar rescue package from the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the World Bank. Like the mess with Citibank and AIG, this will not be the last time that money we are taking from the future earnings of everyone will be used to prop up a failed system.

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Category: Credit Backlash, Economics, Geopolitics, Main, Recession Watch

About the Author ()

Bruce Henderson is a former Marine who focuses custom data mining and visualization technologies on the economy and other disasters.

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