An enormous economic hurricane is now raking Europe; destroying its economies, pushing its banks to the edge of extinction and bankrupting its businesses and people.
The carnage is no longer confined to the infamous PIIGS nations — Portugal, Italy, Ireland, Greece and Spain — the ne’er-do-wells of the Union who have run up debts that are so massive, they can never be repaid.
Growth in Germany, Europe’s largest economy, has ground to a virtual standstill — just 0.1 percent in the second quarter from 1.3 percent in the first.
Growth in the French economy — Europe’s second largest — has all but stalled. President Sarkozy’s massive budgetary cuts and higher taxes on investors and job creators may help lower deficits somewhat, but they will also be a huge drag on an already-waning economy.
Nor is the carnage limited to the members of the European Monetary Union. On Friday, we learned that economic growth has slowed to a near-standstill in the U.K. The culprit: Severe government budget cuts, rising inflation and plunging consumer confidence.
And so, like a massive economic hurricane, this great international debt crisis is now thundering westward. It has breached the Atlantic and is just now beginning to make landfall in the United States.
But while Europe frantically cuts spending in a desperate attempt to avoid the ultimate debt meltdown, Washington is still jacking up the U.S. national debt at the blistering rate of more than 10 percent per year.
As a result, we have already witnessed the unthinkable: America’s credit rating cut for the first time in history by Standard & Poor’s.
Meanwhile, the majority of U.S. state and local governments are barely keeping body and soul together; releasing convicts from prison, laying off police, firefighters and emergency personnel, even selling off state buildings just to avoid financial disaster.
And now, as we’ve repeatedly warned, the U.S. economy is slowing again.
Last week, we learned that the crisis that triggered this great recession is worse than ever: Mortgage applications have plunged to a 15-year low. Nationally, median home prices are falling as much as 5 percent or 6 percent in a single month.
On Thursday, we learned that the employment picture is still worsening.
Consumer confidence has sunk to within an eyelash of its all-time low — devastating news to an economy in which 70 percent of all activity is driven by consumer expenditures.
And of course on Friday, we learned that Bernanke and his Fed are effectively passing the buck; refusing to act to stimulate the economy, saying it’s up to Congress and the White House to get the economy growing again.
This is the worst news imaginable for the U.S. economy. A renewed slowdown now means huge decreases in tax revenues — not just for Washington, but for every state and local government in the nation.
And that, in turn, means even greater budget shortfalls … even greater deficits … even faster growth in our already-unpayable government debt … than anything we’ve seen so far.
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