Is Europe The Next Lehman?

A lot has been written about Europe and The Great European Crisis. Many in the media have proclaimed, without any reasonable explanation, that the European Crisis is behind us now and the global economy is about the hit escape velocity and propel itself into the ether of space and time. Though I personally would love to see that scenario play-out, the truth is far from what the media and the politicians want us to believe. In reality the European Crisis is getting worse and worse every single day. Though this may not be reflected directly in the Bond Yields of the European nations (Yet), it’s certainly visible in the economic data coming out of Europe.

An example would be, Youth Unemployment. The Youth Unemployment in Europe is at the highest it has ever been. In Spain, the epicenter of Europe’s youth unemployment crisis, the rate has soared to 55.6%

Spain Unemployment Rate

 

Spain is second only to Greece, where 57.6% of those under 25 are unemployed

Greece Unemployment Rate

 

Italy, the largest and most important economy in the euro periphery, has seen a relentless surge to 36.6% youth unemployment

Italy Unemployment Rate

 

These are just a few examples of a monstrous problem facing Europe.

The next challenge facing Europe is the massive drop is Exports due to a strong EURO (EUR). Its economics 101: A stronger currency makes it less favorable (more expensive) for others to buy your products. As a result, the manufacturing of the country goes down, which in turn results in jobs being cut and unemployment rate going UP; and since not a lot of people are earning money, no-one has any money to spend; which in turn drags the whole economy into an abyss of higher unemployment, higher inflation (as will be the case with Europe given the high Debt/GDP ratios of the European Countries), and complete social unrest. It is a viscous cycle. And I’m afraid Europe has passed the point-of-no-return long ago. It’s just a matter of time before this grand experiment, aka. European Union, collapses on itself, giving birth to a huge Black-Hole, that will eventually suck the whole global economy into one cosmic singularity.

or Maybe Not. Only time will tell.

Source: Bloomberg, Business Insider

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