Finance

Will Europe’s Economic Instability Lead to a World-Wide Financial Crisis?

European Leaders Fear Bank Collapse, Major Economic CrisisA European crisis that’s worse than the 2008 collapse of Lehman Brothers? It’s possible, according to some analysts and officials.

Europe is experiencing severe economic strain as the global economy continues to sputter along. Early this morning, The Blaze brought you a report that explores the potential consequences of the death of the euro. Now, The New York Times, among other outlets, is sounding the alarm on European leaders‘ increasing fears that one of the continent’s major banks may fail.

Leaders, of course, have a reason to worry. With economic conditions continuing to be subpar, the prospect of a major bank failure is a horrifying one. Considering what happened in America following Lehman Brothers’ collapse just three years ago, these worries are certainly legitimate.

European Leaders Fear Bank Collapse, Major Economic Crisis

The Times reports about Europe‘s quest to ensure this same fate doesn’t befall one of its own banks. But the newspaper isn’t the only outlet warning about potential calamity. In a Telegraph piece by Jeremy Warner entitled, “Is the

World Doomed to Suffer Another Depression?,” these same themes are addressed. Warner writes:

We appear to be at another pivotal moment, with Western economies once more staring into the abyss. At a conference in Frankfurt this week, Josef Ackermann, chief executive of Deutsche Bank, compared events to the Lehman Brothers catastrophe of 2008 and warned that many banks in Europe are essentially bust.

While European leaders are steadfast about avoiding such a catastrophe, the economic landscape has changed. While the continent’s leaders are ready to use hundreds of billions of euros in bailout funds to avoid economic chaos, American banks are playing it safe. The Times writes:

…questions continue to mount about the ability of Europe’s banks to ride out the crisis, as some are having a harder time securing loans needed for daily operations.

American financial institutions, seeking to inoculate themselves from the growing risks, are increasingly wary of making new short-term loans in some cases and are pulling back from doing business with their European counterparts — moves that could exacerbate the funding problems of European banks.

Let’s think about the ramifications of a potential disaster. While some here in America and others outside of Europe may simply ignore such a prospect dismissing it as a European problem, the situation is more complicated than that. Federal Reserve Chairman Ben S. Bernanke has, himself, noted that a European crisis could expand to impact other global regions. The nature of the worldwide economy creates a scenario in which economic pains could quickly shoot from Europe across the Atlantic in no time.

The Times reports that European bank shares are at their lowest point since early 2009 and markets took a hit on Tuesday. Considering these indicators, European leaders have been putting safeguards in place to avoid a Lehman-like implosion. Among them:

- New credit lines were opened by the European Central Bank to assist institutions in need of funding

- The proposed Greek bailout will assist nations on the continent with loans that will help recapitalize and financially restructure banks

- The Central Bank has been purchasing bonds from Italy and Spain to avoid a spike in interest rates, allowing for European banks to “shed troubled assets for cash”

European Leaders Fear Bank Collapse, Major Economic CrisisOf course, these are merely attempts at prevention before more serious remedies are needed. The problems are complex, as the Times notes:

In Europe, the worry is that government bonds owned by European banks could fall sharply in value if economically distressed countries cannot pay back their loans. That would saddle the most exposed banks with huge losses.

As a result, banks are reluctant to lend money to one another and are hoarding cash. “If sentiment continues to deteriorate, ultimately we’ll see a deposit run,” Mr. Finch said. “I’m extremely worried about that.”

In an editorial on Tuesday, The Washington Post questioned Europe’s fiscal unity, highlighting some of the issues that complicate financial matters between the continent’s different nations:

You wouldn’t know it from the way European technocrats discuss the issue, but the E.U.’s lack of fiscal union is not a mere question of governance or institutional design. It is a basic problem of legitimacy. It reflects very real differences of culture, language and history across Europe, as well as citizens’ real, if loosely articulated, concerns about surrendering control over their pocketbooks to a distant bureaucracy.

Clearly, the situation is multifaceted and challenging to say the least. Europe’s many cultures, diverse financial practices and the like create complicated issues when it comes to rectifying the situation on a macro level. But no matter how difficult it is to remedy, the world’s economy depends on all leaders, European and American, alike, to come together to address this ongoing global dilemma.

Comments (56)

1 2
  • HughG
    Posted on September 7, 2011 at 2:21pm

    I admit that I am ignorant on monetary policy. It’s designed to keep me that way.
    I can’t understand how the USA can be in debt to pay back money that was created out of thin air. Why not melt down a car and make a 14 trillion dollar coin and give it to the Fed and say “Paid in Full”.

    Report Post »  
    • CynicalPatriot
      Posted on September 7, 2011 at 10:00pm

      It isn’t rocket science. Our money is backed by the strength of our economy and its use by other nations as a neutral medium of exchange. Creating new dollars decreases the value of all the existing dollars. It’s a way to tax everyone who holds dollars, including the countries who own our long term treasury bonds. You don’t see the tax until it appears in the price of comoddities(food, gas, etc.). The Federal Reserve is pushing the limits of how much inflationary money it can create without doing irreperable harm to the trust that the rest of the world puts in our dollars. Once that trust is destroyed, we go into hyper-inflation. You just learned the basics of our monetary system without having to ask a Harvard economist, who would probably have just told you to shut up and stop worrying about it.

      Report Post »  
  • gmoneytx
    Posted on September 7, 2011 at 1:19pm

    Someone said socialism works until you run out of other people’s money…gee let’s test that theory shall we!

    Report Post » gmoneytx  
    • jakartaman
      Posted on September 7, 2011 at 2:24pm

      The short answer to the headline is YES!
      It will be a world wide economic collapse. (Eurozone 1st, then USA, Japan, the rest)
      Followed by civil disorder (riots)
      Followed by food shortages

      Report Post »  
    • chicago76
      Posted on September 7, 2011 at 8:14pm

      The dollar is tied to the Euro now. We tied them together when we bailed out the European banks. If the Euro falls the dollar will fall also. No one is saying that.

      Report Post »  
  • moreteaplease
    Posted on September 7, 2011 at 1:12pm

    GINGERBREAD posted: “We need to start up our steel industry, our clothing industry, everything that we use to produce here.”

    Darn right!!! Thank You!!!

    Report Post » moreteaplease  
    • chicago76
      Posted on September 7, 2011 at 8:19pm

      Tariffs on Foreign countries dumping goods here. That is what protected our countries industry and made it the greatest in the world. It is what will make it great again. Those one worlders are lying to all of us. There is no free market. Either we tariff all these slave economies or we become a slave economy like them.

      Report Post »  
  • TH30PH1LUS
    Posted on September 7, 2011 at 1:08pm

    I will not be surprised if this happens. Sheeple across the globe have sat silently by allowing themselves to be “regulated” into helpless veal until no one is able to do anything for themselves nor afford to start up business nor “qualify” (due to regulations) for loans.

    Then the geniouses wonder why the economy is stagnant.

    A huge setup is underway. The people who come forward with the “Answer” to the world’s problems will most likely be selling you and your country out to the highest bidder.

    Report Post » TH30PH1LUS  
  • Mike N
    Posted on September 7, 2011 at 1:02pm

    I doubt that he is, but sincerely hope Soros is neck deep in the Euro.

    Report Post »  
  • RedeemedWench
    Posted on September 7, 2011 at 12:55pm

    What this all comes down to is that our money will be worthless. Grocery store shelves will be stocked, but your $$ will not be enough to buy the food. And it will happen rapidly.

    I have been canning, vacuum sealing and storing extra food for months. I have been learning many of the skills that have been all but lost to take care of my family. And I teach others do the same. I truly hope people prepare. City folk for the most part will be in a world of pain.

    Report Post » RedeemedWench  
    • pschlentz
      Posted on September 8, 2011 at 3:27am

      Hope you got a couple firearms and plenty of ammo. If the SHTF you are gonna need it. I don’t think that the majority of Americans even have a clue what is going on in this world and the real potential of chaos in our streets all around our Country. No one to protect you from people that want what you have.
      We must all think through this possibly happening to America.
      Will there be a run on the bank? Which means none of us will be able to get any money for anything until or if the bank decides to open it‘s doors or it’s ATM’s. No, you won’t be able to use your Bank Cards, Cash Cards, etc. What if there is no food at the supermarket, no gasoline, no water, no nothing. You are on your own.
      Will your utilities stay on? Will you have running water? Electricity? Natural Gas? The ability to heat or cool your home? Enough warm clothing, blankets, etc? Will you be able to wash and dry your clothing?
      Imagine if nothing in your home worked. Can’t bathe in your own shower, no water to brush your teeth, only one roll of toilet paper left, no feminine hygiene products. You kitchen stove and oven don’t work, no washer and dryer, no lights, no heat, no cooling, no food for your pets.
      Are you prepared? Are you really prepared. Go through the scenarios, think of everything that you will need for everything. Leave no stone unturned. Walk through preparation of each meal. Got enough food for an extended period of time and everything you need to prepare it, I mean everything? PREPARE

      Report Post »  
    • Dabldo
      Posted on September 9, 2011 at 11:11pm

      Hey ‘wench! You got a sister? I need a woman with a good head on her shoulders. I know far too many who are democrats or liberals and that have put me far into debt helping them out of their bad choices and stretching my loyalty far beyond the point i should have left……. My ph # is dbsibviwqbvdwb. What? This isn’t a dating Blog? Yet? LOL ! TEA!

      Report Post »  
  • gpk
    Posted on September 7, 2011 at 12:10pm

    Would “BULL FECES” suffice?

    Report Post »  
  • gpk
    Posted on September 7, 2011 at 11:39am

    Manna from Heaven & ******** from the White House.

    Report Post »  
  • haroldcheardjr
    Posted on September 7, 2011 at 10:54am

    We are facing some of the worse economic challenges in our nations history.

    Say: “NO 2 BO N 2012”

    Report Post » haroldcheardjr  
  • This_Individual
    Posted on September 7, 2011 at 10:35am

    Yes. That’s why we need Ron Paul as our president!

    Ron Paul 2012!

    Report Post »  
  • Centralsville
    Posted on September 7, 2011 at 10:10am

    What a surprise, the world that turned against God and toward socialism is about to collapse. What a shocker.

    Report Post »  
  • Race
    Posted on September 7, 2011 at 10:01am

    It’s long past time to get rid of “fiat money” which is backed up with/based on NOTHING. Long past time to let the “global economy” crash & burn as well. Redistribution doesn’t work, never has, never will. When countries had their own currencies and economies this sort of world-wide ****-up wasn’t possible. The rats are all scurrying now that the fiat money scheme has been exposed, and you ain’t seen nothing yet.

    Report Post » Race  
  • gingerbread
    Posted on September 7, 2011 at 9:58am

    We are witnessing the failure of the “LIBERAL,SOCIALIST AND COMMUNIST” movement all around the world. You would think that they would have learned something with the total collapse of the Soviet Union. But no, These mental midgets that call themselve “ECONOMISTS” thought that the SOVIET IDEA was good but just needed a little “TWEEKING”. Well, they have run out of “TWEEKS”. Now, it’s getting time to pay the piper. And who will be the ones to do the “PAYING THE PIPER”? The people they have been lying to all these years, that’s who. And the people they have been lying to will be very angry, that they have been lied to. Oh, don’t you worry one bit, because what happens in Europe will happen here also, in a very quick hurry. We need to crank up all of our industry, right now. We need to to revitalise our energy resouces, all of it. We need to start up our steel industry, our clothing industry, everything that we use to produce here.

    Report Post » gingerbread  
    • Ookspay
      Posted on September 7, 2011 at 11:40am

      Dead on, Great Post, dittos!

      Report Post » Ookspay  
    • Mateytwo Barreett
      Posted on September 7, 2011 at 11:59am

      Crank up out “industry”? And what indusry would that be? Oh! you mean that big, run down, abandoned old hulk of a complex. In the bad poartof town, where they ripped up the railraod (that doesn’t exist any more) tracks. The factory that has been shut down for 20 years and all the m achinery and equipment was either scrapped of sent overseas. You mean THAT industry, right! Don’t worry your little head though, the EPA, FCC, DOE, and EOE will not let it happen!

      Report Post » Mateytwo Barreett  
    • chicago76
      Posted on September 7, 2011 at 8:20pm

      Amen brother

      Report Post »  
  • NOBALONEY
    Posted on September 7, 2011 at 9:54am

    The MSM and George Soros are convincing the world that the EU is finished. Is it really? It’s Greece Italy, and Spain that are finished. Japan is also finished. California is finished. The Unied States is on the list with Portugal as the next to be finished. IMF is now controled by China! Communist China chose the top two positions of the IMF, Legarde and Luh Min. President Obama’s Jobs speech and the Congressional12: Futility

    Report Post » NOBALONEY  
  • jakartaman
    Posted on September 7, 2011 at 9:38am

    The short answer is YES.
    And it will be part of the world economic and civil disintegration.
    Stay tuned – Much more to follow:

    Report Post »  
  • boca_chica
    Posted on September 7, 2011 at 9:33am

    No 45mpg cars built in the U.S.( see vw tdi) …..because of regulations.
    No oil and gas drilling….because of regulations.
    No new refineries….because of regulations.
    No new nuclear power plants….because of regulations.
    No prospecting for minerals…..because of regulations.
    Cheap energy and taking raw materials and making products is how this country did it for 200 years and now OUR government says that’s not the way to do it anymore( I won’t even go into the “free trade” crap the government said would be so great). Merchants(companies large and small) like stability-and we don’t have stability-so they sit and wait to see what our goofy government is going to do next. Are their people out there that are so silly as the companies will hire people to make a product that will sit on the shelves? Profit?-they downsized for the recession and are making profit at a reduced rate-you don’t hear that on the news.

    Report Post »  
    • Ookspay
      Posted on September 7, 2011 at 11:42am

      It sounds like you have been listening to Sarah Palin, you both are right on.

      Report Post » Ookspay  
    • M100Spiral
      Posted on September 7, 2011 at 1:03pm

      @BOCA_CHICA and OOKSPAY

      I agree with both of you.

      But, I wish Obama had used the 4 trillion dollars he spent in his first 31 months in office much more wisely!!! In truth, he literally threw that money away.

      I wish he developed a few Corps. These corps could have built the border wall along the borders of California, Arizona, New Mexico and Texas. Or, they could have developed a sound natural gas industry. Or, they could have torn down old dams and rebuilt new ones, as well as repair old highways and freeways.

      This is what Franklin Roosevelt did during the Depression.

      These corps would have been paid less than any of today’s unions, thus stretching the taxpayer’s dollar farther to cover the cost of more projects. In my state and city, his stimulus money only fattened the pockets of the employed union workers. The unemployed were forced to make career changes into lower paying fields and industries.

      My state and city has so many self-respecting unemployed, homeless individuals who would have gladly worked in a corps. We also have an extremely large underemployed workforce.

      He should have established some temporary corps and design projects for each corps!

      Report Post » M100Spiral  
    • Ookspay
      Posted on September 7, 2011 at 7:48pm

      @M100Spiral, all better ideas than what BO did with the 4 trillion. Makes you think that he is almost intentionally ruining America, huh? Remember he is a socialist through and through, that is why he will not release his college thesis or papers at all. They are probaly nothing more than a hatchet plagiarism of Cloward and Piven and rules for radicals. As far as nat gas and Damn projects goes, no chance, envirowackos are just one of this clowns puppeteers. All that this economy needs to take off like a rocket is to get out of the way, slash regulations and capital gains. Reagan created 30 million jobs in 8 years!!! We are in a similar malaise that Reagan inherited and it can happen again. But there is not much more time to save the ship, it is sinking fast.

      Report Post » Ookspay  
    • M100Spiral
      Posted on September 7, 2011 at 10:59pm

      @ OOKSPAY

      Unfortunately, you are right!!! We are sinking very fast!

      Report Post » M100Spiral  
  • Ron_WA
    Posted on September 7, 2011 at 9:32am

    It’s not IF but HOW MUCH will the EU’s problems drag the US & global economy down.

    Report Post » Ron_WA  
  • cabnetdude
    Posted on September 7, 2011 at 9:28am

    The world as you know it today will never be the same very shortly. The commie utopia is about to expose itself.

    Report Post »  
    • smithclar3nc3
      Posted on September 7, 2011 at 9:38am

      What Obama and these liberal dumba55es fail to realize it the American economy is self substaining. We have all the resources to build,power and self substain our Country without outside tyrade sources.
      They are so focused on a global economy that they would let the American economy weaken to support it.

      Report Post »  
    • Mateytwo Barreett
      Posted on September 7, 2011 at 12:03pm

      @Smithclar
      You would hve to be able t utilize said resources. The“regime” has different ideas.

      Report Post » Mateytwo Barreett  
  • cntrlfrk
    Posted on September 7, 2011 at 9:27am

    ‘
    We are watching the Social Justice mentality fail on a global scale.

    Why is nobody screaming this at the top of their lungs to pull us away from this swirling cesspool instead of running headlong into it at full speed???

    .

    Report Post » cntrlfrk  
    • IAMNOTKNOWING
      Posted on September 7, 2011 at 4:32pm

      Not sure which is first, but…

      #1 & #2 = Rapture & Putin (Gog) comes back to power next March and leads the attack on Israel (Ezekiel 38 & 39). Israel wins while nuking Damascus and melting it down with no remnant.

      The World stands in horror.

      #3 The Anti-Christ goes to the U.N. (inspired by Satan himself) and has all the answers. Signs a “strong covenant with many”/U.N. Peace Accord between Israel and the rest of the world for a 7yr. trial period.

      #4 False Peace for 3.5yrs. Israel rebuilds their Temple on the Temple Mount (no objection from the Muslims as they got their a**es handed to them in the previous war.

      #5 Dude shows up on the dedication day, exactly 3.5yrs. in to the Tribulation (which began the second that he signed the strong covenant) and takes his seat in the Temple of God. … the Great Tribulation begins.

      #6 We come back 3.5yrs. later at Armigeddon to watch the Lord put an end to this nonsense. We reign with Him for 1000yrs., the Great White Throne Judgement. Heaven or Hell for the scragglers. Seals up Hell. We re-inherit the Earth.

      The End.

      Eternity begins! ;D

      In the meantime.. buckle-up.

      It won’t be long though.

      Report Post » IAMNOTKNOWING  
  • jkendal
    Posted on September 7, 2011 at 9:27am

    Are we, as taxpayers, going to be asked (forced, really) to bail them out??

    Report Post »  
  • Mandors
    Posted on September 7, 2011 at 9:22am

    Did anyone notice that the USB report notes the biggest risk is that Germany will pull out of the EU? The German economy is booming. Hmmm.

    Report Post » Mandors  
    • chicago76
      Posted on September 7, 2011 at 8:23pm

      Compared to what. Yeah,compared to Italy it is booming It is still running deficits.

      Report Post »  
  • TRONINTHEMORNING
    Posted on September 7, 2011 at 9:15am

    Sounds like a world-wide challenge; bring it on and watch the conservatives make it thru the storm. I don’t worry; I welcome–the challenge.

    Report Post »  
  • Snowleopard {gallery of cat folks}
    Posted on September 7, 2011 at 9:13am

    One thing the people and leaders of Europe need to understand, and perfectly clear at that; the EU is now officially finished, and needs to be dismantled with each of the nations going their own way to recovery or destruction.

    Also, the USA needs to be prepared to sever the links with Europe across the board within a handful of days for when the time comes. For if we do not do so, then America will go down as well soon enough.

    Report Post » Snowleopard {gallery of cat folks}  
    • dmforman
      Posted on September 7, 2011 at 9:31am

      I believe that you are correct, but the current president doesn’t care about America, so if Europe fails, America will also fail.

      Report Post »  
  • texascav
    Posted on September 7, 2011 at 9:11am

    I can hear Obuma now…………. my plans would have worked if it wasn’t for all these other problems like, earthquakes, hurricanes, wars, foreign economies, etc, etc. Everyone else is to blame, but not the Chosen One.

    Report Post » texascav  
  • Gonzo
    Posted on September 7, 2011 at 9:04am

    Great, a new excuse for Obama to use tomorrow…like he needed anymore.

    Report Post » Gonzo  
1 2

Sign In To Post Comments! Sign In

Sign Up For Our Newsletter!

Glenn Beck Radio

Listen to Glenn Beck 24/7 Listen Now
Restoring Love