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"The prospects for the UK economy have worsened. Global demand slowed. And concerns about the solvency of several euro-area government intensified, increasing strains in banking and some sovereign funding markets. These factors, along with the fiscal consolidation and squeeze on households' real incomes, are likely to weigh heavily on UK growth in the near term."
In 1998, even Alan Greenspan once was right, saying:
"It is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress."
Compared to now, it was mild, yet enough to be worrisome. Today, global alarm bells should be sounding.
Europe's debt crisis needs $6 - 8 trillion to resolve, an impossible amount to raise. Bailing out Italy and Spain alone would bankrupt solvent states.
European banks are threefold over-leveraged. Europe's an accident waiting to happen. In fact, it's unfolding in plain sight. Failed bond auctions show it. European Financial Stability Facility (EFSF) bond sales were postponed for lack of interest.
"Europe is the catalyst, and eventually it probably will take the financial system down." Germany and France are discussing a Eurozone breakup to let six weak countries exit the euro, but stay in the EU. All rescue measures tried so far failed.
Bond yields and spreads off bunds say France no longer is AAA. However, if lost, EFSF firepower will seriously erode. Sentiment across Europe signals downturn.
The San Francisco Fed said "(p)rudence suggests that the fragile state of the US economy would not easily withstand turbulence coming across the Atlantic. A European sovereign debt default may well sink the United States back into recession."
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