Europe, Drought, Poverty, Recession All Weigh on Wall Street

The US stock market fell sharply today, mostly because of renewed worries coming out of Europe.

It now looks as if the $100 billion bank bailout package the European Union granted to Spain isn’t going to be enough and the fear is that a much larger, broader bailout of the country’s financial system will be required. Spain is not Greece. Spain has a much larger economy and a much larger banking system. Scraping together the money to fix Spain’s debt woes is a lot easier said than done. In fact, no one is certain that a bailout can or should be accomplished at all.

http://www.cnbc.com/id/48279904

Speaking of Greece, the old problem that was supposed to have been fixed is still very much of a problem. The bailout program that the European Union put together for Greece worked so well that now their Prime Minister is saying their economy is in a “Great Depression:”

http://www.telegraph.co.uk/finance/financialcrisis/9418656/Debt-crisis-Greek-economy-is-in-a-Great-Depression-says-Samaras.html

For now, the Dollar has been the beneficiary of the European trouble, but there are other indications that the dollar’s strength can’t last:

For example, the drought that we have reported on here twice before is getting worse, which means higher commodity prices ahead, pushing inflation fears higher, even as the economy stagnates:

http://www.nytimes.com/2012/07/20/science/earth/severe-drought-expected-to-worsen-across-the-nation.html?_r=3

And despite all the government spending over the past few years, all designed to stimulate the economy, the poverty rate in America is soaring, reaching levels not seen since LBJ originally launched the so-called “war on poverty:”

http://news.yahoo.com/us-poverty-track-rise-highest-since-1960s-112946547–finance.html?_esi=1

Meanwhile, disappointing earnings are pointing to a fast-aproaching recession in the US to go along with those higher food prices. STAGFLATION anyone?

http://www.cnbc.com/id/48259674

Experts expect that recession any time now. Nouriel Roubini says the US economy is going from bad to worse:

http://www.cnbc.com/id/48281577

Anyone who expects good things from the US dollar and stock market in these conditions is whistling past the graveyard. Diversification is the best defense and hard assets provide the best form of diversification.

 

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