Debt and Demographic Decline Breed Global Instability

...leading economies, the U.S., Japan, and the E.U. are declining. That is, about one-sixth of the world's population is losing ground. These big economies are the ones that lead the rest of the world, including China. Countries like China, India, and Brazil, depend on the health of the big economies to keep buying their products and commodities so they can grow and generate wealth for their citizens. _ZeroHedge

Who will be the last man standing? In the coming clash over debt, both within and between nations, what country -- or portion of a country -- will survive and prosper? Difficult to say, given the ubiquity of the deadly duo: debt and demographic decline.

In Europe, one can locate particular problem points, where endebted nations are reaching the end of their borrowing capacity. These nations are coming flashpoints for a fire of unrest that could explode out of control with incomprehensible haste.

A visit to Spain the prior week demonstrated that Greece's financial woes were just the tip of an iceberg on a continent of debt -- the Greek national debt crisis seemed like the first card in a flimsy house. To be in a nation as it is unraveling has an eerie, surreal, mostly indescribable feeling. The storefronts in Athens outside of the tourist areas looked like they'd been through several rounds of a boxing fight, and were just waiting for the knockout punch. Other than the lights being on, the difference between shops closed indefinitely and those currently operating were hard to distinguish. Unless they were pushing merchandise, people wore saddened expressions as they walked by decaying and graffiti-covered buildings. _thetyee

In such environemnts, deadly, destructive riots are always just a spark away. There is no telling where the next upsurge of violence and mayhem would end.

The situation can only get worse, since nobody's interests align. The Greeks want more time to meet their budget targets without having to make more cuts that would cause more public angst. The Germans, whose opinions arguably matter the most since they have the financial ammo, are already in a huff with German Chancellor Angela Merkel about expanding the eurozone's bailout fund. More pushback from Greece about meeting its current austerity measures only fuels the fire. _Time

Towards the end of the last decade, it was popular to proclaim Europe as an example of what we in North America could achieve. This notion was led by books such as Jeremy Rifkin's The European Dream, which described the difference between North American and European values. He argued that on the other side of the Atlantic, citizens found security not through individual accumulations of wealth but through connectedness, respect for human rights and sustainability. _the tyee

But now, as Europe's demographics collapses in on itself, we can see that not even utopia can escape the twin demons of debt and demographic decline and collapse. Europe's states are like teetering dominos, as long as they are coupled together economically. But even if Europe is smart enough to decouple, only select portions of the continent can survive the coming wildfire.

In the third world, we will have "The Coming Anarchy." In the developed world, the anarchy will focus on the third world enclaves, the multicultural cities and non-assimilating banlieus, and spread out from there.

Consider the relative places of safety, where you might find a place for yourself and your families. Hope for the best, prepare for the worst.

Previously published on abu al-fin

No Way to Pretend that this Mangy Dog is a Beautiful Princess

More... FinancialArmageddon: Not a sense of recovery wherever you turn

The global economy remains devastated, despite all popular claims to the contrary. And it is not just Greece, Ireland, Spain, and Portugal which are in trouble. The US is beginning to feel the hurt from ludicrous fiscal and monetary policies which date back to the 1970s -- but which have reached particularly destructive levels under the Obama-Reid regime. The global economy still pivots around the US economy. And that is bad news all around.

1) Existing home sales for April were down 0.5% to 5.05 million as compared to 7.2 million at the peak. Inventories of homes for sale increased to a 9.2 months, the highest since December while prices were down 5% from a year earlier.

2) April housing starts dropped 10.2% to 523,000, barely above the recession lows, and below any level prior to 2008. According to the National Association of Home Builders (NAHB) traffic of potential buyers was still extremely low. Keep in mind that this is an organization that usually puts a positive spin on any results.

3) While weekly initial claims for unemployment insurance declined to 409,000 from the prior week, the number has now been over 400,000 for six straight weeks after a period of coming in below that level.

4) The Philadelphia Fed Index for May fell sharply to 3.9, losing 39.5 points in the last two months. This is also well below the 1st quarter average of 32.9. Both new and unfilled orders dropped significantly while inventories also declined, indicating that the inventory buildup that helped support the recovery may be moving back in line with demand, which has been growing less than production.

5) Consistent with the above, April industrial production was flat. It is likely that production, which had consistently been running ahead of demand, is being reduced as inventories that were depleted during the recession have now caught up. This also may explain the higher level of initial claims.

6) The Empire State Manufacturing Survey was also down 9.8 points to 11.9, the lowest level since December. This index therefore confirms the Philly index and suggests similar lower results from the ISM manufacturing index.

7) The April index of leading indicators declined 0.3%. While one month does not make a trend it was the first monthly drop since last June, and fits in with what other indicators seem to be telling us.

8) Similarly, the ECRI Weekly leading indictor has been down for three of the last five weeks and has been about flat since mid-December after rising steadily from the recession lows. This is indicative of at least a pause in coming economic growth, and perhaps something worse.

9) April core retail sales increased only 0.2%, and were probably flat to slightly down when adjusted for inflation. Higher income from reduced social security withholding was more than offset by higher gasoline prices, tepid wage increases, high unemployment, lower home prices and recessionary levels of consumer confidence. And this is happening even before the end of QE2, which has been keeping the economy afloat since November.

10) The April Small Business Survey, after rising weakly from recession lows, has now dropped 3.1 points in the last two months. Even at its most recent high it was below any level in its history prior to 2008. Key segments that declined were plans to increase employment and capital expenditures. In addition the number expecting sales to rise also dropped.

11) In addition to the domestic concerns cited above, the global picture is also not looking too rosy. ECRI's long leading indicator of global industrial growth peaked last August at 0.7 and stood at 0.1 in March. ECRI managing director Lakshman Achuthan stated "There's a downturn in global industrial growth in clear sight". EU production fell in March and retail sales have been flat for six months. In the UK there's been no GDP growth for six months. Japanese GDP dropped 3.7% annualized in the 1st quarter and 3.0% in the 4th. Note that the earthquake occurred on March 11th, toward the end of the quarter, so cannot be fully blamed for the 1st quarter and not at all for the 4th. Industrial output in all of the BRIC nations seems to be slowing, and current monetary and fiscal policies suggest more to come.

All in all it seems to us that the odds are high that a domestic and global economic slowdown is already in place. In the U.S. the slowdown is happening with only six weeks to go before the end of QE2, a program that has been a major prop for even the tepid recovery we've undergone so far. For the stock market nothing seems to matter until, suddenly, it does. _ComstockFunds

Did you imagine that China is ready to take over as the global economy's driving force? Better think again. More here.

via EconomyWatch
Drowning in Debt: Why the economy still cannot seem to recover.

Reading the consequences of debt: The hidden taxes of debts, deficits, and a deflationary : inflationary chaos -- along with dysfunctional government regulations, incentives, corruption, and laws -- combine to crush any nascent recovery in its cradle.

But the disaster is compounded by the effect of demographics: If human capital is not growing and improving, any realistic hope of economic growth and development is delusional.

Japan is the canary in the coal mine, the early warning signal for the rest of the world, on the dangers of debt and demography. The PIIGS of Europe are following closely behind. Russia would be a global economic basket case except for Siberian wealth -- and how much longer can the bear hold on to Siberia in the face of shrinking demographics and evaporating human capital?

Will the people of the west ever wake up to what they are doing -- and allowing to be done -- to themselves? If not, what are the alternatives? Who is John Galt?