It might be obvious to all now that Europe will not escape a severe recession. At the time we first wrote this prediction, the media talk was about how the rest of Europe was pulling together and saving Greece.
Well, they’ve “saved” Greece and now Greece is back in trouble. They’ve “saved” the European banks with their LTRO bailout and now the banks are in severe trouble again.
Spain is the headliner now because their problems are severe and unavoidable. Also, Spain is much larger than Greece and not nearly so easy to “bail out”.
But let’s be clear. The bailout of Greece was not for Greece. Greece had a higher debt level after the bailout than they had before it. How does that solve their debt problems? The reality is the bailout was meant to help the northern European banks who would be hurt if Greece defaulted. This direct transfer of cash which was supposedly for the Greek people made it nowhere near the Greek people. As a matter of fact, the northern Europeans went after the Greek government’s holding of gold as collateral so that after the deal failed they would come out of it with the best money there is.
They also required Greece to put aside taxpayer money to guarantee the northern European bailout loans. So think this through…. Greece has higher debt now than they did before the great rescue because the new loans were more than the amount of old loans which were written off. So the debt is higher.
Also, the new loans were put in place to pay back old loans so they didn’t go to help the people of Greece at all. Meanwhile, the Greek people must put away more of their money to guarantee loans so that means less of Greek tax revenue is available for the budgetary requirements of the Greek people.
Don’t get us wrong, there’s no question that Greece has gotten carried away with socialism and are trying to make a system effective where hardly anyone actually puts in real productive work anymore. This is pretty common throughout Europe, particularly southern Europe where the biggest problems are.
So we’re not one of the ones who think that it’s all Goldman Sach’s and Germany’s fault and poor Greece is being used. Greece is the main user over the last decade plus of Euro joining and the subsequent carrying on. However, more recently, the rest of Europe has been using Greece for the benefit of the bankers in the handling of the problems this year. And Greece is still in trouble.
Spain, Italy, & Portugal still have major problems and will see continued recession. It will get uglier and uglier over there. It’s still to be determined whether enough of Europe is willing to print till infinity to pay off all this debt and accept the resulting hyperinflation. Or whether Europe will break up and allow the problem countries to go their own way. But one of these things will have to happen because the debt is far too large and the recession will be far too deep. Will go deeper into which way we think things will break on Monday.
This is the 22nd post in a series. You should read the initial thoughts on these forecasts here. and the Overall Prediction Page here. Here are the rest of the posts: 3) Ben Bernanke’s Dollar Devaluation Plan, 4) The Coming US Dollar Devaluation, 5) Stock Market Volatility, & 6) Stocks to Fall in 2012, 7) The European Crises, & 
European Options, 9) European Prediction, 10) Recession in Japan, 11) Japanese Yen Crash,12) War with Iran, 13) Jewish Perspective on Iran, 14) Commodities to End 2012 Lower, 15) Where Will Gold Go Next?, 16) Gold, Should you Wait?, 17) Will Silver Move Higher?, & 18) Why Buy Silver Now?, 19) Oil Prices to Explode Higher, 20) Bonds Will Fall, 21) US Dollar, 22) European Recession, 23) Sovereign Default in Europe, 24) China’s Slowing, & 25) US Recession.