Blog: Who Will Pay for Europe's Debt?

“In America, there’s a failure to appreciate Europe’s leading role in the world.” 

Barack Obama

"Spain is likely to be the straw that breaks the camel’s back in Europe. Concerns over the crisis in Spain among the EU nations are likely to grow over the coming months and year. It is hard not to see a crisis in Spain by the end of the year, if not by this summer.” Economist/Author, Harry S. Dent – from the HS Dent Forecast 10 May 2012

We recently produced this video to give you the complete picture specifically about the key linchpin in Europe, the Spanish Debt.

Spain is too big to fail and too big to bail out. Yet their real estate bubble was perhaps the most inflated, far bigger than the U.S.'s, which then puts their heavily leveraged banking system in jeopardy. And in Spain, the banks were all in for the boom.

What does it mean to you? It means that the stock market is due for it's next long term "correction." So more and more this decade, Baby Boomers will have their plans dashed by "unexpected" setbacks in their retirement portfolios. (They're not really unexpected at all to those who study and pay attention.)

The only thing keeping the American stock market inflated right now is the drug of the Federal Reserve's Quantitative Easing program. It works, not because the American economy has come back to life so hard that the markets have acquired a new unabashed optimism. But rather because the banks don't lend the money out, and since the Fed is keeping them out of their usual safe port of buying U.S. Treasury Bonds, they are pushing their capital into riskier investments of stocks and commodities, and thereby inflating the markets. The stock market then appears healthy, despite the economy. A crack addict in the middle of his/her high also looks extremely strong and healthy.

This is really a topic for a whole other blog. Don't get me going. The point is just that there is a price to pay for building investment markets on so much stimulus, which works less and less each time given. And you should not be fooled by its irrational exuberance.

The underlying American economy will turn around by the end of this decade by sheer demographics, which will kick in greater demand organically, if the drugs and debt don't kill us off first. I'll talk more about this in my next blog.

But for now, do your self a favor, go get a cup of coffee and watch this video for about 30 minutes.