Living in America During 2012 Eurozone Crisis

You’ve heard about the upcoming global financial crisis that is happening in 2012 of course.  It’s origins are plentiful and they begin with the good ole’ U.S.A. (naturally).  Don’t get me wrong I don’t have anything against America.  Wait… that’s a lie.  I have lots against America including their blatant racism, gun worship, invasion of Iraq on the pretence of looking for weapons of mass destruction (we all know it’s a war about oil)…I could go on and on. As a side note, how do we know for certain that the war against Iraq isn’t about nuclear weaponry? Consider that Germany was already making weapons of mass destruction during WWII.  The states knew it and didn’t invade them over it…because there isn’t any oil beneath Germany.  Zing.  Anyhoo.

How did it all begin?  The subprime mortgage crisis that originated in the late 1990s started the ball rolling toward recession and stock market crash, the impending Great Depression of the 21st century. A subprime mortgage is offered to people who are risky in terms of being able to make mortgage payments, in other words to pay off their loan.  Along with taking risks with millions of risky borrowers, many lenders offered them ARMs or adjustable rate mortgage, meaning the borrowers could make smaller initial payments if they were willing to absorb a possible increase in interest on the loan.  Of course, this is exactly what happened along with many people defaulting on their loans because they simply couldn’t afford to pay them. We all saw that one coming. Clearly they weren’t familiar with Shakespear’s work: neither a borrower nor a lender be. Watch 2012 The next Great Depression

The impact of the subprime mortgage foreclosures decimated Wall Street almost as literally as the Al-Qaeda airplane that destroyed the World Trade Centre buildings. Watch the Man who saw it coming. The states took interest out of it’s economy to pay down it’s deficit to several countries, causing it’s economy to contract. Many people lost their jobs and of course they stopped paying taxes. In order to keep making debt payments, the U.S. had to keep taking out more loans and consequently their debt grew.Even if one of the countries to which the USA was making it’s debt payments was also making debt payments to the US, both countries became poorer because the interest kept making their debts bigger.  Watch Global Financial Crisis explained in 96 seconds.

However the states alone are not to blame for the 2012 financial crisis: the failing euro in the ISE has a great deal to do with it. In 1999, 17 of the 27 Member States of the European Union initiated use of the euro as their formal currency.  There were several reasons to use the euro as a nation’s currency:

1. It is speculated that the euro increased trade within the eurozone by 5 – 15%.
2. It helped to control arbitrage and speculative trade among countries with its “law of one price” value.
3. The euro increased investment rates and made it easier for corporate firms to access financing in Europe.
4. The euro created reductions in market risk exposures for nonfinancial firms both in and outside of Europe.

For a time the euro did very well but problems soon arose:

1. the value of the euro slipped and one major reason was debt problems of some nations, especially Ireland, Portugal, Spain, and Greece.
2. other countries’ demand for the euro decreased, lowering the euro market supply and demand.
3. the euro’s value versus the dollar required significantly more euros to purchase a U.S. dollar.
4. Many North American corporations have foreign operations in Europe and these operations experienced a significant profit loss.

Of course this means that imports will become more expensive in North America to balance the profit losses in foreign operations,credit card interest rates will increase, and an accompanying inflation rate will soar. Unemployment rates are increasing although not in significant numbers (they’re pretty darned high as it is).  Watch how the poor get poorer – the bitter truth .  Sounds like we’ve dug ourselves into quite the economic hole.  But wait!  There is a glimmer of hope!  Now that you know about the upcoming financial global crisis in 2012 there are several things you can do to debt-proof yourself:

1. Consolidate and pay down your credit card debt and stop using the darned thing.Watch Debt consolidation Canada.
2. If you are American, hedge, rather than save your money. Watch You’re a loser if you are saving.
3. If you are Canadian take advantage of the TFSA (tax-free savings account).Read about TFSA
4. Seek dividends from company shares you own.
5. Fund your 401K or your RRSP. Watch Lance Roberts – Financial Planning to do list 2011
6. Scale down your lifestyle – no more unnecessary luxuries or stop trying to keep up with the Joneses (or worse, be the Joneses). Watch the Joneses
7. If you suspect you might face foreclosure get a lawyer right away and learn your legal rights.
8. Ease up on buying oil and gas; try car pooling and using public transportation. Watch Myth: World is running out of oil Beware of using a bicycle however….that could be as risky as a subprime mortgage. Read The Ongoing Saga of the Michael Bryant-Drug Courier Manslaughter
9. Be aware of little spending habits and reduce them.  Read What your Starbucks habit really costs you
10. Prepare yourself for potential job loss:  have a 3 month emergency fund available and be aware of the industries that anticipate the most job losses for 2012. Watch In pictures the 10 worst jobs for 2012
11. Be aware of the top 10 jobs for 2012 (and the ensuing decade). Watch top 10 career choices 2011 (still applicable for 2012).  Watch Donald Trump’s Advice on Choosing a Career

It is inevitable that most of us are going to take a hit one way or another but perhaps forewarned is fore-armed.
Your welcome.