Triple-Crisis on the Near Horizon
Martin D. Weiss Ph.D.
Monday, April 9, 2012
I return from a wonderful vacation — beardless, tan, and rested … but also very wary of the unfolding events:
Just when everyone thought the debt crisis was over … giant deficits didn’t matter … and the global economy was on the mend …
We have witnessed a sudden shift in global events … and the shift is about to hit the fan!
Here are the facts:
First, the European sovereign debt crisis has exploded back into the headlines with a surprise new collapse in the Spanish bond market.
The underlying reason: Spain is caught in the same vicious cycle as Greece …
• The more the government tries to cut spending to reign in its bulging federal deficit, the more its economy sinks.
• And the more the economy sinks, the bigger the deficit, mandating still deeper budget cuts.
The evidence: Last month, Spanish unemployment soared to a record high, forcing the government to admit that Spain’s national debt will be a lot bigger than expected, and mandating a second round of austerity measures.
Indeed, just four years ago, Spain’s debt was just 35.8% of GDP. This year, Madrid estimates it will soar to more than DOUBLE that level, at 79.8% of GDP. And with the vicious cycle now in full swing, it could hit 100% soon thereafter.