At this point, it is no secret that the eurozone’s situation has taken a heavy toll on the global economy. Since the credit crisis in the eurozone began, ripple effects have been felt around the world. Countries were already struggling to find economic growth after the American financial crisis of 2008; the eurozone credit crisis simply added to their woes.
The cause of the credit crisis in eurozone countries is not a surprise. Many of the 17 eurozone member governments earned little revenue (taxes) as property prices fell and individuals/companies made less money, while those same governments spent more than they received. This resulted in higher national debt.
Now there is a growing body of evidence that some eurozone countries are still struggling with the same problems that led them into the credit crisis in first place. These governments are still unable to control their expenses and are failing to implement the sort of austerity measures the European Central Bank (ECB) has announced it wants in return for buying bad debt.
We have already discussed in these pages about Spain’s situation. One of the biggest gross domestic product (GDP) contributors in the eurozone is having troubles implementing austerity measures, because its citizens don’t want them.
Greece’s government has failed multiple times in enacting austerity measures. Now that it needs another round of funding to pay for its expenses—it is struggling once again—eurozone countries want the Greek government to implement more cuts to the deficit.
Greece, Ireland, Spain, and Italy are just few of the eurozone countries that have spent beyond their means for years and borrowed too much. They simple can’t afford to pay for their expenses anymore and they don’t have any options other than to beg for a bailout.
France’s government has announced that it will impose an income tax of 75% on peoples’ earnings that are over one million euros per annum. In addition, the government is planning to reduce its spending, so it can bring back the budge deficit to 3.0% instead of 4.5% of GDP in 2012. (Source: Newsmax, September 28, 2012.)
The U.S. national debt has increased significantly following the credit crisis—over $16.0 trillion now and increasing every passing second. The U.S. budget deficit has increased exponentially, trillion-dollar annual government deficits have become the norm, a record amount of people are on food stamps, unemployment is a huge problem in this country, and average Joe American is feeling the pain.
If proper steps are not taken soon, we might start looking a lot like the 18th eurozone member—with our creditors asking us to start implementing austerity measures, raising taxes, and cutting our pensions.
Where the Market Stands; Where it’s Headed:
Unbeknownst to most investors, we are at one of the most critical points in this generation’s stock market history. The Dow Jones Industrial Average opens this morning at 13,494, about 670 points below its all time high hit in October 2007 of 14,164.
If the Dow Jones Industrial Average breaks significantly past 14,164 through to a new high, we will have a confirmed new bull market on our hands. If the stock market doesn’t break through to the new high, we will have confirmation that the stock market has spent the last five years creating the right shoulder of a classic head-and-shoulders pattern.
This means the stock market has put in a huge top that will remain in place for years to come and that all we have been witnessing since March of 2009 is a bear market rally—which is my belief.
What He Said:
“Why Google stock will go higher: Most investors in Google, surprisingly, are retail investors. And that’s why the stock can go higher—because only 20% of the stock is owned by institutions. If the institutions jump in and buy Google, the stock will certainly move higher.” Michael Lombardi, Profit Confidential, June 2, 2005. Michael recommended Google stock as a buy on June 2, 2005, when the stock was trading at $288.00. On November 5, 2007, when Google reached $700.00 U.S. per share, Michael advised his readers to sell their Google stock and to put the proceeds into gold-related investments. Coincidently, gold bullion was also trading at about $700.00 per ounce in November 2007. Michael’s message was to trade each $700.00 share of Google into $700.00 of gold, because he saw gold as a much better investment.