Bob Chapman
International Forecaster
Between now and the end of the year, most likely in the fall, we’ll see major financial and economic problems in Greece, Ireland, Portugal, Belgium, Spain and Italy. Those events will sorely test Germany, France, Holland and Austria.
Over and over we hear announcements from Brazil of trade wars. Brazil is deliberately reining in their currency, the real, due to its strength. They have imposed reserve requirements on domestic banks’ foreign exchange positions. These are taxes on investments and de facto currency controls. Such actions are very good moves that cause indirect higher gold prices.
In Ireland harsh measures are being taken. Public spending will be cut 12%. Added to that is a tax increase that would be a reduction of $7.8 billion. Public services and the minimum wage will be cut as well. The wealthy will pay more and child support payments will fall.
While the above troubles manifest themselves the US goes merrily on its way like nothing was wrong. Americans have been pre-propagandized, as they were under stimulus – one into believing a recovery is in progress. We don’t share that prediction. The Irish and others understand their problems, but Americans cannot come to grips with them.
Like other members of the Euro zone, Ireland discovered they could borrow cheaply under one interest rate fits all. This policy, which we predicted 14 years ago, would be disastrous, was disastrous for Ireland, Greece, Portugal, Spain and Italy, and Belgium. Needless to say, the leverage provided by cheap money brought on speculation, particularly in real estate, that brought on today’s problems. Yes, speculation by individuals was a problem, but as in other countries, the problems really lie with the banks, which are really responsible for these tragedies. They should have never made the loans in the first place. Stupidly, the Irish government bailed out the banks just like Greece did. They should have defaulted and allowed the banks to fail. The banks were more than complacent. Just as we see now in the US the banks have at least temporarily been bailed out and depositors guaranteed that their savings are safe. There are also the stimulus programs everyone else has tried as well, that we have seen ultimatey don’t work. That is because they are geared to bail out the financial sector and not the economy.
Ireland’s budget will be followed by equally harsh budgets guided by the IMF, which will lead to decades of poverty, as bad as the 800 year reign of Britain over the Emerald Isle. PM Brian Cowen and Finance Minister Brian Lenihan sold out the Irish people to British bankers. The vultures are circling the Republic to prepare for years of future enslavement. Many have called it economic treason.
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