Global Economy

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." -- attributed to Thomas Jefferson

With Greece on the verge of default, Italy sucked into the storm, and French banks drawing ever closer to collapse, the euro has finally reached its endgame.

All that is solid melts into air. What we are experiencing at present will define our era for centuries to come. Precisely twenty years after the final collapse of the Soviet Union and the demise of state communism, we are now approaching the endgame for the European Union and the potential demise of European capitalism. The train of economic integration has come grinding to a halt. These are tectonic shifts in world history. But our leaders seem largely oblivious to it.

In many ways, this year has already made its mark upon history: 2011 is the year of revolution, war and crisis; of terror, truth and disaster; of revenge, revolts and riots. But, as we predicted in an article back in December 2010, it might yet be remembered as the year of collapse. None of the underlying causes of the enduring global financial crisis have been addressed. Indeed, the chosen policy response — draconian austerity measures — has only made matters worse.

Fears of financial Armageddon proliferate as the global economy stutters, investors abandon hope and the euro teeters on the brink of collapse.

“This was the week that investors abandoned all hope,” the Financial Times dramatically reported on Friday. “Fears of a new credit crunch caused share prices to plummet on both sides of the Atlantic,” the Guardian wrote, ”as fragile banks struggle to raise funds in financial markets.” As a result, the shares of some of Europe’s largest banks fell to their lowest point in two years, while those of US banks fell back to levels unseen since the collapse of Lehman Brothers.

US borrowing costs fell below 2 percent “for the first time in at least 60 years,” as investors, wary of stagnating global growth and a renewed financial meltdown, scurried into traditional safe havens like gold, Swiss francs and treasuries. “There is a serious concern that you are going to get recession sooner or later,” said Jim Reid, credit strategist at Deutsche Bank. “It is a phenomenal period in history.”