The Largest Economy In The World Is Imploding Right In Front Of Our Eyes

Michael Snyder, Contributor

A devastating economic depression is rapidly spreading across the largest economy in the world. Unemployment is skyrocketing, money is being pulled out of the banks at an astounding rate, bad debts are everywhere and economic activity is slowing down month after month. So who am I talking about? 

Not the United States - the economy that I am talking about has a GDP that is more than two trillion dollars larger. It is not China either - the economy that I am talking about is more than twice the size of China. You have probably guessed it by now - the largest economy in the world is the EU economy.

Things in Europe continue to get even worse. Greece and Spain are already experiencing full-blown economic depressions that continue to deepen, and Italy and France are headed down the exact same path that Greece and Spain have gone. Headlines about violent protests and economic despair dominate European newspapers day after day after day. European leaders hold summit meeting after summit meeting, but all of the "solutions" that get announced never seem to fix anything. In fact, the largest economy on the planet continues to implode right in front of our eyes, and the economic shockwave from this implosion is going to be felt to the four corners of the earth.

On Friday, newspapers all over Europe declared that Greece is about to run out of money (again).

The Greek government says that without more aid they will completely run out of cash by the end of November.
Of course the rest of Europe is going to continue to pour money into Greece because they know that if they don't the financial markets will panic.

But they are also demanding that Greece make even more painful budget cuts. Previous rounds of budget cuts have been extremely damaging to the Greek economy.

The Greek economy contracted by 4.9 percent during 2010 and by 7.1 percent during 2011.

Overall, the Greek economy has contracted by about 20 percent since 2008.

This is what happens when you live way above your means for too long and a day of reckoning comes.

The adjustment can be immensely painful.

Greece continues to implement wave after wave of austerity measures, and these austerity measures have pushed the country into a very deep depression, but Greece still is not even close to a balanced budget.

Greece is still spending more money than it is bringing in, and Greek politicians are warning what even more budget cuts could mean for their society.

For example, what Greek Prime Minister Antonis Samaras had to say the other day was absolutely chilling....

Greek democracy stands before what is perhaps its greatest challenge," Samaras told the German business daily Handelsblatt in an interview published hours before the announcement in Berlin that Angela Merkel will fly to Athens next week for the first time since the outbreak of the crisis. 

Resorting to highly unusual language for a man who weighs his words carefully, the 61-year-old politician evoked the rise of the neo-Nazi Golden Dawn party to highlight the threat that Greece faces, explaining that society "is threatened by growing unemployment, as happened to Germany at the end of the Weimar Republic". 

"Citizens know that this government is Greece's last chance," said Samaras, who has repeatedly appealed for international lenders at the EU and IMF to relax the onerous conditions of the bailout accords propping up the Greek economy.

But don't look down on Greece. They are just ahead of the curve. Eventually the U.S. and the rest of Europe will go down the exact same path.

Just look at Spain. When Greece first started imploding, Spain insisted that the same thing would never happen to them.

But it did.

By itself, Spain is the 12th largest economy in the world, and right now it is a complete and total mess with no hope of recovery in sight.

The national government is broke, the regional governments are broke, the banking system is insolvent and Spain is in the midst of the worst housing crash that it has ever seen.

On top of everything else, the unemployment rate in Spain is now over 25 percent and the unemployment rate for those under the age of 25 is now well above 50 percent.

An astounding 9.86 percent of all loans that Spanish banks are holding are considered to be bad loans which will probably never be collected. Before it is all said and done, probably ever major Spanish bank will need to be bailed out at least once.

Manufacturing activity in Spain has contracted for 17 months in a row, and the number of corporate bankruptcies in Spain is rising at a stunning rate.

Five different Spanish regions have formally requested bailouts from the national government, and the national government is drowning in an ocean of red ink.

Meanwhile, panic has set in and there has been a run on the banks in Spain. The following is from a recent Bloomberg article....

Banco Santander SA (SAN), Spain’s largest bank, lost 6.3 percent of its domestic deposits in July, according to data published by the nation’s banking association. Savings at Banco Popular Espanol SA, the sixth-biggest, fell 9.5 percent the same month. 

Eurobank Ergasias SA, Greece’s second-largest lender, lost 22 percent of its customer deposits in the 12 months ended March 31, according to the latest data available from the firm. Alpha Bank SA (ALPHA), the country’s third-biggest, lost 26 percent of client savings during that period.

Overall, the equivalent of 7 percent of GDP was withdrawn from the Spanish banking system in the month of July alone.

Thousands of Spaniards have become so desperate that they have resorted to digging around in supermarket trash bins for food. In response, locks are being put on supermarket trash bins in some areas.

But Greece and Spain are not alone in seeing their economies implode.

As I wrote about recently, the number of unemployed workers in Italy has risen by more than 37 percent over the past year.
The French economy is starting to implode as well. Just check out this article.

The unemployment rate in France is now above 10 percent, and it has risen for 16 months in a row.

It is just a matter of time before things in Italy and France get as bad as they already are in Greece and Spain.

The chief economist at the IMF is now saying that it will take until at least 2018 for the global economy to recover, but unfortunately I believe that he is being overly optimistic.

As I have said so many times before, the next wave of the global economic crisis is rapidly approaching. Depression is already sweeping much of southern Europe, and it is only a matter of time before it sweeps across northern Europe and North America as well.

Neither Obama or Romney is going to be able to stop what is coming. The global economy is getting weaker with each passing day. The central banks of the world can print money until the cows come home, but that isn't going to fix our fundamental problems.

The largest economy in the world is imploding right in front of our eyes and nobody seems to know what to do about it.

If you believe that Barack Obama, Mitt Romney or Ben Bernanke can somehow magically shield us from the economic shockwave that is coming then you are being delusional.

Just because what is going on in Europe is a "slow-motion train wreck" does not mean that it will be any less devastating.

Yes, we can see what is coming and we can understand why it is happening, but that doesn't mean that we will be able to avoid the consequences.

This article first appeared here. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.

Enter your email address to subscribe to our newsletter:


Delivered by FeedBurner

Be the Change! Share this using the tools below. Sharing on Reddit and Newsvine will help the most.