Fiscal austerity has arrived in the Western world and the ramifications will be brutal.
Western governments are now coming face-to-face with the crippling effects of massive budget cuts; a shrinking GDP and a diminished ability to pay existing debts.
It's a pernicious cycle.
Most of the world is in a debt trap from which there is no escape. These governments are facing a death spiral. Continual budget deficits will bleed you to death. And the solution — austere budget cuts — will only hasten that death, as the following AP story illustrates:
Greece's finance minister said Monday that the crisis-afflicted economy will shrink more than expected this year, putting further pressure on the country's ambitious deficit-cutting effort.
Evangelos Venizelos said the ministry forecasts annual output to shrink between 4.5 percent to 5.3 percent this year.
Venizelos had previously admitted that the recession might be greater than last year's 4.5 percent, a whole percentage point worse than initially estimated.
"All the measures we are taking ... are aimed to stem the recession," Venizelos said.
"We must achieve our fiscal targets -- and this has become very difficult due to the deeper recession," Venizelos told a news conference.
"There is undoubtedly a vicious cycle. We have been obliged over the past two years, and in the coming three, to implement a gigantic fiscal adjustment ... which has a negative impact on the real economy. But these are the terms under which we receive our loans and rescue packages."
Chronic debt is the device that's being used to hold European governments hostage. Bankers eagerly assist governments in taking on more debt than they can ever possibly repay.
Consequently, the banks then seize an indebted nation's income, sucking it up through debt payments. The banks also force governments to surrender their sovereignty by selling their national assets — which the banks then buy at fire sale prices.
Bankers did this very thing in Greece, taking possession of all state assets. As a result, the bankers are now profiting from a crisis they helped create.
In the midst of a debt crisis, the bankers dictate the terms — and they are never favorable to the governments involved. In fact, the terms are usually crippling.
This is nothing less than a financial coup d'etat.
In reality, this isn't truly a debt crisis. It's a well-orchestrated plan.