Europe Is Not "Fixed": Two Charts (February 13, 2013)
The Eurozone is not a debt crisis that is "fixed," it is a debt crisis waiting to implode.
The happy-talk that the Eurozone debt crisis has been resolved is ubiquitous. But when did ubiquitous happy-talk make it correct? Since the crisis is about debt--too much of it, and too much of it cannot and will not be paid back--then perhaps it would be prudent to look at two charts of eurozone credit, courtesy of the insightful chart-based website Market Daily Briefing.
Here is total Eurozone credit since the inception of the euro. This is roughly equivalent to TCMDO (Total Credit Market Debt Owed) in the U.S.
Notice that total credit owed has nearly tripled since the introduction of the euro in 1999, and that it continued to expand robustly after a brief pause in the global financial crisis of late 2008-early 2009. Recently, its expansion has flattened, but there is essentially no evidence that credit has declined, i.e. deleveraging.
Next up: Eurozone credit growth. Recall that debt-based, consumption-based economies like Europe, the U.S., China, Japan, et al. cannot expand without credit growth. Thus any decline of credit growth spells deflation:
This is not a debt crisis that is "fixed," this is a debt crisis waiting to implode. Total credit owed is still sky-high--only a trivial percentage of the debt has been written down or renounced.
Meanwhile, the credit growth needed to drive expanding consumption has literally fallen into the abyss.
This is the worst of all possible worlds in a debt-dependent economy: a massive overhang of impaired debt and a collapse in credit growth.
The only thing that's been "fixed" is the mainstream media's perception management
propaganda. So is perception all there is to reality? The next six months should
provide an answer.
Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:
1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
5. Technological, financial and demographic changes in our economy
Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of
the same coin: once we accept responsibility, we become powerful.
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)
NOTE: gifts/contributions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
"This guy is THE leading visionary on reality.
He routinely discusses things which no one else has talked about, yet,
turn out to be quite relevant months later."
Or send him coins, stamps or quatloos via mail--please request P.O. Box address.
Subscribers ($5/mo) and contributors of $50 or more this year will receive a weekly email of exclusive (though not necessarily coherent) musings and amusings.
At readers' request, there is also a $10/month option.
What subscribers are saying about the Musings (Musings samples here):
The "unsubscribe" link is for when you find the usual drivel here insufferable.
All content, HTML coding, format design, design elements and images copyright © 2013 Charles Hugh Smith, All rights reserved in all media, unless otherwise credited or noted.
I am honored if you link to this essay, or print a copy for your own use.
Terms of Service: