When Will The European Super-Bubble Pop?

Tyler Durden's picture

Authored by Nick Giambruno via InternationalMan.com,

France’s new president can’t keep the European Union together.

In early May, France elected globalist darling Emmanuel Macron. His victory gave the EU a short-term boost. However, it did not change the fundamental problems with Europe’s artificial mega-state.

Doug Casey agrees:

The EU was built upon a foundation of sand, doomed to failure from the very start. The idea was ill-fated because the Swedes and the Sicilians are as different from each other as the Poles and the Irish. There are linguistic, religious, and cultural differences, and big differences in the standard of living.

 

Artificial political constructs never last. The EU is great for the “elites” in Brussels; not so much for the average citizen.

 

Meanwhile, there’s a centrifugal force even within these European countries. In Spain, the Basques and the Catalans want to split off, and in the UK, the Scots want to make the United Kingdom quite a bit less united.

 

You’ve got to remember that before Garibaldi, Italy was scores of little dukedoms and principalities that all spoke their own variations of the Italian language. And the same was true in what’s now Germany before Bismarck in 1871.

 

The chances are better in the future that the remaining countries in Europe are going to fall apart as opposed to being compressed together artificially.

I think it’s unlikely the Europe of tomorrow will look anything like the picture below.

fools-europe.jpg

A Fool’s Vision of Europe’s Future

Europe is far more likely to splinter and eventually resemble the map below. It shows what Europe would look like if all its current separatist movements were to succeed.

europe-separate.png

Europe—If All Its Current Separatist Movements Succeed

Right Now, Italy is Europe’s Weakest Link

Italy has one of the most indebted governments in the world. It’s borrowed over $2.4 trillion. Its debt-to-GDP ratio is north of 130%. (For comparison, the US debt-to-GDP ratio is 104%.)

But the situation is actually much worse.

GDP measures a country’s economic output. However, it’s highly misleading. Mainstream economists count government spending as a positive when calculating GDP. A more honest approach would count it as a big negative.

In Italy, government spending accounts for a whopping 50%-plus of GDP. Remove that from the calculation, and I suspect we’d see how hopelessly insolvent the Italian government truly is.

In other words, Italy is flat broke.

I don’t see how the Italian government could possibly extract enough in taxes from the productive part of the economy to ever pay back what it’s borrowed.

Meanwhile, Italian Government Bonds Are in a Super Bubble

They’re currently trading near record-low yields. (When bond prices go up, bond yields do down.)

Over $1 trillion worth of Italian bonds actually have negative yields.

It’s a bizarre and perverse situation.

Lending money to the bankrupt Italian government carries huge risks. So the yields on Italian government bonds should be near record highs, not record lows.

Negative yields could not exist in a free market. They’re only possible in the current “Alice in Wonderland” economy created by central bankers.

You see, the European Central Bank (ECB) has been printing money to buy Italian government bonds hand over fist. Since 2008, the ECB and Italian banks have bought over 88% of Italian government debt, according to a recent study.

This is stunning.

It means that Italy’s financial system depends completely on ECB money printing.

Italian government bonds are, without a doubt, in super-bubble territory. It won’t be long before a pin pricks this bubble and… pop.

That could happen soon.

Earlier this month, the credit rating agency Fitch downgraded Italy’s credit rating from BBB+ to BBB.

And Mario Draghi, the head of the ECB, recently announced that after five years of manic money printing, he’s finally achieved his wrongheaded goal of 2% inflation.

Casey continues: 

Inflation is one of the most misused words; few even think about its actual meaning. What is inflation? “Well, that’s prices going up.” No, it’s not. To say that is to confuse cause and effect. Inflation is an increase in the money supply. You inflate when the money supply is increased by more than real wealth increases.

 

Prices go up as a result. People have forgotten about that. Today, inflation seems to come from out of nowhere, like a freak storm. No cause. Unless it’s blamed on the butcher, or the baker, or an evil oil company. Nobody ever thinks it’s a central bank—the Fed in the US—that actually creates more money, and causes inflation.

 

You’ve heard that central banks are trying to create a little bit of inflation because, they say, “A little bit of inflation is good.” No, even a little bit of inflation is deadly poisonous. For two reasons: It creates the business cycle. And it destroys the value of savings. Saving is the basis of capital creation.

 

People who say that a little inflation is a good thing are dangerous fools.

Now that the ECB has reached its 2% inflation target, Germany and other EU countries are pushing the central bank to stop printing so much money.

This is the last thing the Italian government wants. Remember, the ECB buys a lot of Italian government bonds with those freshly printed euros.

If the ECB stops buying Italian government bonds, who will step up? The answer is nobody.  Italian banks are already completely saturated with government bonds.

Germany wants the money printing to stop. Italy wants it to continue.

But, since the ECB has reached its stated inflation target and Germany has crucial elections later this year, I think Germany will get its way. 

This is very bad news for Italy’s government and banking system.

Once the ECB—the only large buyer—steps away, Italian government bonds will crash and rates will soar.

Soon it will be impossible for the Italian government to finance itself.

Italian banks—which are already insolvent—will be decimated. They hold an estimated €235 billion worth of Italian government bonds. So the coming bond crash will pummel their balance sheets.

It’s shaping up to be a lovely train wreck.

I think we’ll see a full-blown crisis in Europe soon.

So, why should Americans or anyone outside of Europe care?

It’s simple.

The EU is the world’s largest economy.

The euro currency is the second most widely held currency in the world.

Financial chaos in Europe means financial chaos worldwide.

The Financial Times commented on what would happen if the EU were to collapse:

"It would probably lead to the most violent economic shock in history, dwarfing the Lehman Brothers bankruptcy in 2008 and the 1929 Wall Street crash."

A crisis in Europe would send a lethal lightning rod through the world’s currency and stock markets. Unparalleled economic turmoil — far worse than 2008 — could follow.

New York Times best-selling author Doug Casey and I just released a time-sensitive video revealing how this could all play out. Click here to watch this video.

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wee-weed up's picture

 

 

Uh...  it's already popped.

Europe has flushed itself down the toilet.

Stuck on Zero's picture

"The idea was ill-fated because the Swedes and the Sicilians are as different from each other as the Poles and the Irish."

Twenty million Arabs, Africans, and Pakistanis should fix that problem.

BandGap's picture

And yet over 90% of the immigrants to Ireland are from Poland. There are Polish neighborhoods in any decent sized town in Ireland. It works.

max2205's picture

Sounds like a good movie 

eforce's picture

The Protocols mentions Europe-wide revolutions so I suspect they'll hold it together as long as possible, like a pressure cooker, so the final eruption is massive.

The UK election has actually made Brexit more likely and the new government even more "right wing".

open calender's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

virgule's picture

This colorful patchwork may seem pretty, but it's not even close to reality. Fance split horizontally in Occitania and France?

Never mind that you wouldn't be able to find 50 French willing to vote on such horizontal divide; instead you could simply look at the election results between Marcon and Le Pen, where France was in fact greatly divided vertically!!!

Internet-is-Beast's picture

This just has to be false. There are towns like Tuam and Limerick that look like the third world with white flight.

Treason Season's picture

Speaking of Ireland, if you weren't aware of it, I am sorry to tell you but it now has a Hindoo homo for a prime minister. Yes, it's true so let's all have a proper Irish wake for the old country and get shitfaced.

fleur de lis's picture

Ireland is in the EU so he was promoted to get the Irish used to having a new identity.

He is a doctor so he is smart enough, but he is culturally and socially alien.

Which is just what the EU wants for all its compliant little slaves.

katagorikal's picture

Irish and Poles are similar, because they are Catholic without having being Roman, so they got repentance without decent roads - and they both like a drink or two.

fleur de lis's picture

The Irish / Poish mix works becuase they share a common religion, and similar cultural values.

The problem is that even cultually compatible migrants move for one reason -- finances -- then do whatever needs to be done to stay.

Even if it is to the detriment of the natives.

The newcomers become incorporated into the local economy and as long as the money comes in no one notices the exit doors getting blocked.

And both nations are in the EU which means if one breakes away both will suffer socio-economic turmoil.

Therein lies the problem.

Normal productive people just want to improve their own lives, but the EU slavemasters use this to get all sorts of newcomers to different lands, and then give them the vote.

Like voters everywhere, they will primarily vote their wallets.

Since a break with the EU threatens their livelihood, fear grips them and they vote to stay, not understanding that they are adding more locks to their own chains.

They think .gov Mommy and .gov Daddy will always take care of them.

They do not understand that their caregivers are in fact their slavemasters and they will all be sold in due time.

Checkmate.

It's all a perverse game.

 

NWO / EU vs Populace

100

-100

 

 

Eyes Opened's picture

Yep... they are hard drinkers like us & have a good work ethic like us...

Theyre also catholics.. Tho when drunk, they have a tendency towards fighting, usually amongst themselves.... whats not to like ??   :-)

jomama's picture

Yeah dude. When's the last time you've been to Europe? Never?

Xredsx's picture

The British are waking up to the fact that they been colonised, not by foreign troops but by using corruption. We know the world is controlled by corruption from a bunch of rich men who are hell bent on winning world domination. The planet is destroyed. We are so fucked right now. But lucky enough the British have a Queen. A powerful one too. Someone will ask her to pick a side. Im sure she will back the people. We got the numbers. About quarter of the world share one queen. 

Allen_H's picture

I spent the day with my cat, it was his last day, the 'Adventure Cat' we called him, he was real, not like this useless sheite we read. He was strong(the doctors said it took a whole lot more people to hold him), but he had a short life, too much adventure, at least he lived it, unlike us! His name was MAXI, And he took it to heart, lived up to his name.

I know you all do not come here to read this kinda stuff, but I am cannot help myself.

chunga's picture

Sorry to hear about that, we love our pets too and greatly prefer their company over most people.

Allen_H's picture

Thank you, still trying to contain myself, it is so hard.

chunga's picture

There is another one out there, a different one, that really needs a good home, and when you're ready it will find you.

Allen_H's picture

Before Maxi passed on I was saying to him: When you are reborn, come find us. We are waiting for you and we love you.

yomutti2's picture

So what did your cat in?

 

Allen_H's picture

You sound crude, but it was his kidneys.

Also, one of his biggest medical bills was paid by the Glock family, the gun makers, Mrs. Glock told her organization to pay off all of the bill.

explosivo's picture

I'm sorry for your loss. 

Allen_H's picture

Thank you for your concern, it took Maria and I 5hrs before we could leave his side, even then it was very hard for her. We are also thankful to Ms. Glock for all her help and care to Maxi. It was a bill we could never of paid ourselves. Maxi will know this also.

Sauerkraut-Opinion's picture

Other than stated in the text Germany there is no relevant independent-movement: Neither in Saxoni, nor in Swabia, Hesse or Bavaria. Absolutely inappropriate compare the situation with Catallonia, Basque country or Scotland. 

 

 

Allen_H's picture

Well in Austria we as the people living here do not let government control daily life. We still do what we want, always. And they are very aware that if they cross the line, there is a REAL danger to themselves.

WallHoo's picture

Man,you Austrians are psychos...not. :D

Allen_H's picture

I could not agree more :D

OverTheHedge's picture

I'm not convinced the UK map s very accurate, either. Half-a-dozen disaffected weirdos does not a separatist movement make. Cornwall is theoretically a separate country, but economically could never survive as independent. Wessex and Mercia are just things someone once heard about and threw in to make it look good. Yorkshire, perhaps - they always were bloody contrary. Only Scotland and Wales, the original independent kingdoms, could actually make a go of it, and they would lose out hugely without transfers from England. Unless, of course, London ceased to exist, suddenly, and the new financial centre moved to Edinburgh. Generally speaking, the map is a bag of bollocks.

williambanzai7's picture

I'm afraid we will have to focus on this eventuality when it finally occurs. We have been waiting for years already. Let's be patient...

lasvegaspersona's picture

The Euros are lovely people I am certain they will get along fine.....usually..

Bobbyrib's picture

http://www.usgovernmentspending.com/percent_gdp

According to the website above the US's government spending is 36% of GDP. With the infrastructure spending planned, the tax cuts, and the increase in spending on the Military Industrial Complex that will only rise. We are approaching the 50% mark just like the Italians. I guess the only difference is that the Fed can do whatever it wants and does not answer to anyone. If the Fed wants to print. it prints. Fiscal conservatism is at an all time low in our country. When does the dollar bubble pop? You think we have problems when the Italian debt bubble pops, wait until the dollar bubble pops and the standard of living for those not holding PMs or productive assets plummets.

lasvegaspersona's picture

oops

the mapmaker shows Ireland as one big happy 'green'...did you lose your orange crayon>

PodissNM's picture

That's the contrarian Irish for you. If every other country is breaking apart, they'll get back together.

Don Sunset's picture

LONG LIVE THE KING!

hooligan2009's picture

i agree with almost everything (like fiscal deficits reduce economic growth) but this

"You inflate when the money supply is increased by more than real wealth increases. Prices go up as a result. "

the implication is that, since inflation is the average price increase of goods and services across the economy, that as thing like drug prices and tuition fees increase, that other products and services must decrease (by a slightly smaller amount to get inflation, rather than deflation).

i voew this as nonsensical as the measure of inflation itself, with all its hedonistic adjustments. inflation is a balancing item, as is GDP.

the fiscal deficit and its roll-up into debt, is the issue. reductions in fiscal deficits and actually running fiscal surpluses are treated as contracting GDP AND EVIL, which is counter intuitive and a completely absurd notion when countries are bankrupt because of perpetual deficits.

WallHoo's picture

Yeah sure...Because you know,money fall from the sky...So why not make everyone run fiscal surpluses,after all the martians will buy our exports to fund our usury...right?

hooligan2009's picture

as opposed to your alternative of always spending what you don't earn and can never pay back? sounds like you are advocating the same lying, cheating and stealing that has taken place in government for decades - whilst hiding behing the curtain of debt.

try living within your means and not using soemone else's money for a change - it's refreshing.

WallHoo's picture

Blah blah blah blah blah...The same bullshit again and again,where do money come from jackass???Ou ou whait,is it from gorvement deficits and private lending?That makes me wonder,how the fuck are you gonna pay for the interest if it doesnt exist?Hmmmm how about let the economy colapse and find an "equilibrium",that will work perfectly...

But wait you have a solution cause you are smart,right??GOLD GOLD is the answear,gold expands at a 2% rate,and it is "real" money...And somehow it ignores usury and never goes boom...Remind me how many times the gold standard was crushed...

Eh.Here's an idea,the state can actually print money(debt free) and use it to to build stuff(not to pay entitlements),while the banks chanel money to WEALTH PRODUCING sectors of the economy,only.Naaaaah that cant work it will ruin the party,im sure your idea is better...Its not like the elites can controll gold right??

By the way dumbass i live within my means,i dont have a choice,like everybody else...Have fun paying those debts with money that fall somehow from the sky...

WallHoo's picture

My point is that the problem is usury,you either adress that or you loose every time no matter what.

WallHoo's picture

Do we need debts(public) alltogether?What if its not odious?Do we have to pay the banker for the use of our own money?

WallHoo's picture

What a bunch of bullshit that is...I hate the EU and the Eurozone(especialy that) as much as the next guy,but that is fucking stupid...The crisis in the EU is all made up,the faggots in brusels want a paneuropean finance minister and a eurobond to tie everybody together,until that happens the crisis will continue as much as it is needed to the degree that each country need it.For example the pussies in germany dont want a lot,thats why there is none,they already dont like theyre own country.

Allen_H's picture

Those faggots in Brussels and Germany know that if they try anything more drastic, their numbers are up. I think they know it, the reason we have not seen much law making lately, they are scared to go to the next level.

WallHoo's picture

It will be forced,one step at a time.Why dont you Austrians dont fuck off from the eurozone,somebody has to make a start in order to set us all free...

Allen_H's picture

I am Scottish, but have been living in Austria for the last 6 years, so I am a bit of both nations now. There are good people here, and most will not believe the western msm bullsheite. That I was happy to learn.

In Scotland, most belive everything from the telly. Like trying to argue with robots.

WallHoo's picture

Had no idea the Austrians were that smart...

Allen_H's picture

Yes, it was a surprise to me also, but they love conversation, as well as conflict (in words only), and can sus out bs quite fast. Sometimes that is good, other times not, hahahaha.