Welcome to Poor America. 43 Million and counting

History repeats itself as corporate colonialism claims another nation-state.  The United States is a prisoner on its knees waiting to be shot on the head.

Washington Post

One in seven Americans is living in poverty, the highest number in the half-century that the government has kept such statistics, the Census Bureau announced Thursday.

Last year was the third consecutive year that the poverty rate climbed, in part because of the recession, rising from 13.2 percent in 2008 to 14.3 percent, or 43.6 million people, last year.

Asians were the only ethnic group whose poverty rate did not change substantially; every other race and Hispanics experienced increases in poverty rates.

In addition, 51 million Americans were uninsured, as the number of people with health insurance dropped from 255 million to less than 254 million — the first decrease since the government started keeping track in 1987. The number would have been worse because 6.5 million fewer people got insurance through their jobs, but it was offset by a leap in government-backed health insurance. More than 30 percent of Americans now get coverage from the government.

“Given all the unemployment we saw, it’s the government safety net that’s keeping people above the poverty line,” Douglas Besharov, a University of Maryland public policy professor and former scholar at the American Enterprise Institute, told the Associated Press.

The grim statistics reflect the depth of the recession that began almost three years ago and could have an impact on midterm elections less than two months away.

“These numbers should be a wake-up call,” said Peter Edelman, a Georgetown University professor and co-director of the Georgetown Center on Poverty, Inequality and Public Policy. “These are deeply disturbing numbers.”

At organizations where the unemployed come to get help finding a job or seek food, the numbers were no surprise.

“In the decade I’ve been doing this work, this is a low point,” said Jason Perkins-Cohen, executive director of the Job Opportunities Task Force in Baltimore. “We’re getting a real feeling of desperation. For sheer numbers, it’s a new, unhappy world.”

At the nonprofit Action Though Service in Prince William County late Thursday morning, the shelves of the agency’s pantry were starting to empty, as the line for help snaked out the door with a few dozen people seeking assistance.

Prince William resident Carol Williams said she has come to the shelter once a month since January, when she was laid off from her job at United Medical Center due to budget woes.

“I worked since I was 15, and, now, for the first time I don’t have a job and I can’t feed my family,” said Williams, 55. “I have a degree; doesn’t matter. The jobs aren’t there.”

Williams said she has been applying for dozens of jobs a week and had about 20 interviews since January. “I think people are scared to hire someone who is not working,” she said, adding there also is just a lot more competition because of the high unemployment rate.

A single mother, Williams has five mouths to feed — children and grandchildren– ranging in age from 17 months to 28. Williams said she was able to raise three sons on her own, but she now turns to the food pantry at ACTS and her father and friends for help.

“We had no bread, no nothing last Friday because the pantry was closed,” she said. “Luckily a friend helped me or we would have had no food for the weekend.”

Advocates said they’re seeing a lot more people like Williams.

“We have definitely seen many more individuals who are very well-educated, with high degrees, where it’s the first time to ever be in a situation to ever have to ask for help for food or shelter,” said Vickie Koth, executive director of Good Shepherd Alliance in Loudoun County.

Koth recalls one family of four in particular, where both parents were highly educated — the mother was a lawyer, and the father was a mortgage broker. “They were in the business of buying and selling homes, and they had three foreclosures within the same span of time and were homeless for the first time.

“We’re full all the time and we turn people away every day, and that’s always been true. But the types of people that call have changed,” Koth said. “Time after time I’ve heard individuals say, ‘I’ve given to shelters, I’ve volunteered at food pantries. I’ve never thought I’d be here myself.’ “

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Choosing healthy foods now called a mental disorder

NaturalNews.com

In its never-ending attempt to fabricate “mental disorders” out of every human activity, the psychiatric industry is now pushing the

Eating healthy foods, pseudo-scientists say, is sign of a mental disorder.

most ridiculous disease they’ve invented yet: Healthy eating disorder.

This is no joke: If you focus on eating healthy foods, you’re “mentally diseased” and probably need some sort of chemical treatment involving powerful psychotropic drugs. The Guardiannewspaper reports, “Fixation with healthy eating can be sign of serious psychological disorder” and goes on to claim this “disease” is called orthorexia nervosa — which is basically just Latin for “nervous about correct eating.”

But they can’t just called it “nervous healthy eating disorder” because that doesn’t sound like they know what they’re talking about. So they translate it into Latin where it sounds smart (even though it isn’t). That’s where most disease names come from: Doctors just describe the symptoms they see with a name like osteoporosis (which means “bones with holes in them”).

Getting back to this fabricated “orthorexia” disease, the Guardian goes on to report, “Orthorexics commonly have rigid rules around eating. Refusing to touch sugar, salt, caffeine, alcohol, wheat, gluten, yeast, soya, corn and dairy foods is just the start of their diet restrictions. Any foods that have come into contact with pesticides, herbicides or contain artificial additives are also out.”

Wait a second. So attempting to avoid chemicals, dairy, soy and sugar now makes you a mental health patient? Yep. According to these experts. If you actually take special care to avoid pesticides, herbicides and genetically modified ingredients like soy and sugar, there’s something wrong with you.

But did you notice that eating junk food is assumed to be “normal?” If you eat processed junk foods laced with synthetic chemicals, that’s okay with them. The mental patients are the ones who choose organic, natural foods, apparently.

What is “normal” when it comes to foods?

I told you this was coming. Years ago, I warned NaturalNews readers that an attempt might soon be under way to outlaw broccoli because of its anti-cancer phytonutrients. This mental health assault on health-conscious consumers is part of that agenda. It’s an effort to marginalize healthy eaters by declaring them to be mentally unstable and therefore justify carting them off to mental institutions where they will be injected with psychiatric drugs and fed institutional food that’s all processed, dead and full of toxic chemicals.

The Guardian even goes to the ridiculous extreme of saying, “The obsession about which foods are “good” and which are “bad” means orthorexics can end up malnourished.”

Follow the non-logic on this, if you can: Eating “good” foods will cause malnutrition! Eating bad foods, I suppose, is assumed to provide all the nutrients you need. That’s about as crazy a statement on nutrition as I’ve ever read. No wonder people are so diseased today: The mainstream media is telling them that eating health food is a mental disorder that will cause malnutrition!
Shut up and swallow your Soylent Green

It’s just like I reported years ago: You’re not supposed to question your food, folks. Sit down, shut up, dig in and chow down. Stop thinking about what you’re eating and just do what you’re told by the mainstream media and its processed food advertisers. Questioning the health properties of your junk food is a mental disorder, didn’t you know? And if you “obsess” over foods (by doing such things as reading the ingredients labels, for example), then you’re weird. Maybe even sick.

That’s the message they’re broadcasting now. Junk food eaters are “normal” and “sane” and “nourished.” But health food eaters are diseased, abnormal and malnourished.

But why, you ask, would they attack healthy eaters? People like Dr. Gabriel Cousens can tell you why: Because increased mental and spiritual awareness is only possible while on a diet of living, natural foods.

Eating junk foods keeps you dumbed down and easy to control, you see. It literally messes with your mind, numbing your senses with MSG, aspartame and yeast extract. People who subsist on junk foods are docile and quickly lose the ability to think for themselves. They go along with whatever they’re told by the TV or those in apparent positions of authority, never questioning their actions or what’s really happening in the world around them.

In contrast to that, people who eat health-enhancing natural foods — with all the medicinal nutrients still intact — begin to awaken their minds and spirits. Over time, they begin to question the reality around them and they pursue more enlightened explorations of topics like community, nature, ethics, philosophy and the big picture of things that are happening in the world. They become “aware” and can start to see the very fabric of the Matrix, so to speak.

This, of course, is a huge danger to those who run our consumption-based society because consumption depends on ignorance combined with suggestibility. For people to keep blindly buying foods, medicines, health insurance and consumer goods, they need to have their higher brain functions switched off. Processed junk foods laced with toxic chemicals just happens to achieve that rather nicely. Why do you think dead, processed foods remain the default meals in public schools, hospitals and prisons? It’s because dead foods turn off higher levels of awareness and keep people focused on whatever distractions you can feed their brains: Television, violence, fear, sports, sex and so on.

But living as a zombie is, in one way quite “normal” in society today because so many people are doing it. But that doesn’t make it normal in my book: The real “normal” is an empowered, healthy, awakened person nourished with living foods and operating as a sovereign citizen in a free world. Eating living foods is like taking the red pill because over time it opens up a whole new perspective on the fabric of reality. It sets you free to think for yourself.

But eating processed junk foods is like taking the blue pill because it keeps you trapped in a fabricated reality where your life experiences are fabricated by consumer product companies who hijack your senses with designer chemicals (like MSG) that fool your brain into thinking you’re eating real food.

If you want to be alive, aware and in control of your own life, eat more healthy living foods. But don’t expect to be popular with mainstream mental health “experts” or dietitians — they’re all being programmed to consider you to be “crazy” because you don’t follow their mainstream diets of dead foods laced with synthetic chemicals.

But you and I know the truth here: We are the normal ones. The junk food eaters are the real mental patients, and the only way to wake them up to the real world is to start feeding them living foods.

Some people are ready to take the red pill, and others aren’t. All you can do is show them the door. They must open it themselves.

In the mean time, try to avoid the mental health agents who are trying to label you as having a mental disorder just because you pay attention to what you put in your body. There’s nothing wrong with avoiding sugar, soy, MSG, aspartame, HFCS and other toxic chemicals in the food supply. In fact, your very life depends on it.

Oh, and by the way, if you want to join the health experts who keep inventing new fictitious diseases and disorders, check out my popular Disease Mongering Engine web page where you can invent your own new diseases at the click of a button! You’ll find it at:http://www.naturalnews.com/disease-…

G20: Banks must hold on to Cash for coming Crisis

The International Crime Syndicate, better known as the G20, determined at its last meeting that the collapse and consolidation of the global economy will begin around 2012 and finish in 2016 with the liquidation of all countries who are in debt with the IMF and the World Bank.

By Luis Miranda
The Real Agenda
June 29, 2010

Bankers and G20 members have direct and indirect ways to speak to the public. At the end of the latest G20 meeting in Toronto, both

From right to left: Canadian Prime Minister Stephen Harper, UK Prime Minister David Cameron and U.S. President Barack Hussein Obama.

groups spoke very clearly about what they have in mind for the foreseeable future. First, they are all in the run to help the process of global consolidation. Second, they will extend the current depression by slowly cutting the available cash for lending. Third, they will continue their austerity programs in a country by country basis to slowly kill their economies and consolidate each nation. Fourth, now that they have robbed the people’s taxes through their rescue packages, they plan to rob shareholders by putting the burden of future rescues on them when the next crisis comes. Fifth, they are disingenuous or irresponsible by thinking that putting aside 130 billion pounds will create any security for the economy, given that only the derivative schemed debt ascends into the quadrillion of dollars. And lastly, they intend to seed and water the final implosion, which according to their communique, can come as soon as 2012.

If all these sounds confusing, please let me explain.

Let’s start by remembering that the G20, and mainly the G8 were the ones who caused the current financial crisis. They did it through their front companies e.g. banks, which implemented a series of corrupt schemes to bankrupt economies and whole countries through investment and betting into risky and sometimes nonexistent financial products e.g. derivatives. These schemes were allowed to exist given the fact that for the past two decades most of the regulations put in place to stop financial fraud were eliminated as an excuse to enable “free markets”. What deregulation effectively permitted was the creation of bogus investing plans which the banks later offered to countries, states and municipalities -often times through governments- and used them to acquire all their infrastructure and cash through the issuance of debt or fraudulent investment.

It has become clear that the G8 and the bankers are not interested in improving current economic conditions. They simply want to extend the crisis as long as they need to, in order to execute their final plan of global implosion. That is what emerges from the idea of cutting lending money and asking banks to hoard the cash for the next crisis, as the G20 communique says. Although 130 billion pounds is peanuts in comparison with the debt most G8 countries hold today, the action of keeping the cash in reserve paints a clear picture of what the ‘leaders’ have in mind. What they want is a slowly and painfully grind down the economies in order to cause the greatest damage. Such policy will assure them the consolidation of more resources before the final blow to the global economy is given.

One of the most important tools the bankers have used along the last 100 years is to create an artificial bubble of money abundance -Fiat money- in order to get the countries and the public to trust them. This is what many describe as economic booms. But given the fact that the global economy is based on debt and fractional reserve banking, the only goal the money bubbles had was to hook up the greatest amount of debt on consumers to then pull the cash off the markets. By doing this, the bankers accelerate their consolidation process. Along with the reduction in lending, G8 nations agreed to continue the austerity plans in each individual country. Austerity will be implanted on the working class by cutting services such as police, hospitals, school funding, and social programs. This will in turn cause civil unrest, which is what the bankers want in order to officially freely unleash their military and technological control grid. A preview of what this grid would look like was seen on the streets of Toronto during the last G20 meeting. It was also seen during Argentina’s collapse in 2001.

The infamous rescue packages glorified by the IMF and the World Bank as the best way to avoid a complete collapse of the global economy -which as explained before was caused by the bankers themselves- were the biggest transfer of money and resources in the history of the world. Only the United States gave the bankers around $25 trillion in tax payer money so Goldman Sachs, Iberia Bank, JP Morgan Chase, Bank of America and others could pay their shareholders their chunk of the loot. See a complete list of what banks got the cash here. But those $25 trillion were not enough, of course. Germany for example, voted to give 66% of its annual revenue to the banks. Going by the G20’s communique it is clear they are planning another big collapse, possibly the last one. It is also clear they will have to rob someone else this time and that is what the bankers and the ‘leaders’ have said. They will stick the next rescue package to the banks’ shareholders -not to the big ones, though-. So if you have investments in any bank, it is advised to rescue yourself out of it before the new banking package comes along. Shamelessly, they will obligate the banks to hold billions so when the next crisis comes, taxpayers will not be burdened as if we don’t know those billions are the same they stole last 2009. Now that they consolidated and stabilized their fraudulent financial system, it won’t matter if other banks fail, because they are all covered.

The idea that 130 billion pounds is a safety net for a future crisis, or double dip recession as they like to call it, is preposterous. Derivative-produced debt is, depending who you ask, between $600 trillion and $1 quadrillion. According to Robert Chapman, from the theinternationalforecaster.com, buying derivatives is not investing.  It is gambling, insurance and high stakes bookmaking.  Derivatives create nothing.” According to the Bank of International Settlements, the derivative bubble has grown exponentially to a point where the amounts negotiated under this scheme has long surpassed the world’s GDP. “Derivative trades have grown exponentially, until now they are larger than the entire global economy.”Credit default swaps (CDS) is the most common form of derivatives. CDS are bets between two parties on whether or not a company will default on its bonds. They are indeed illegal insurance policies, with no requirement to hold any asset. CDS are used to increase profits by gambling on market changes.

The WEB of DEBT in which the current economy was built throughout the past 100 years was the tool used in a process to reverse everything humans achieved. It was not unintended however, as this was the mechanism the globalist bankers planned on using from the beginning. Every time the world experienced a financial crisis like in 1929-1933, the grip of control tightened more and more. The measures to avoid a total collapse, as we were told, were not such. They were simply ways to postpone the imminent collapse.  But the measures the bankers implemented cannot be used forever. Sooner rather than later something will give in. The step by step, ad hoc and non-holistic approach of Fed and Treasury to crisis management has been a failure. . . . [P]lugging and filling one hole at [a] time is useless when the entire system of levies is collapsing in the perfect financial storm of the century. A much more radical, holistic and systemic approach to crisis management is now necessary,” says professor Nouriel Roubini. founder of Roubini Global Economics.

After turning the global economy into a service-based system, where no quality products are manufactured; after driving developing countries into massive debt while collapsing the economies of the western world, the bankers are ready for their last move: a one last crisis. According to the G20 communique, its members must cut their deficits by 2013, a process that already started. This process is supposed to end in 2016, when the nations should have stabilized their deficits. Cutting and then stabilizing deficits means that debtor countries will have to find a way to pay their debts in full to the IMF and World Bank according to the conditions imposed by those entities. Every country that does not pay in full will be liquidated and their resources will be automatically transferred to the globalist bankers. Imagine what happened to Argentina, Greece and Iceland in the last decade, but instead of being those countries, the debtors will be the United States, Spain, Portugal, England and Germany.

$1.2 Quadrillion Derivatives Market Dwarfs World GDP

AOL Finance

One of the biggest risks to the world’s financial health is the $1.2 quadrillion derivatives market. It’s complex, it’s unregulated, and it ought to be of concern to world leaders that its notional value is 20 times the size of the world economy. But traders rule the roost — and as much as risk managers and regulators might want to limit that risk, they lack the power or knowledge to do so.

A quadrillion is a big number: 1,000 times a trillion. Yet according to one of the world’s leading derivatives experts, Paul Wilmott, who holds a doctorate in applied mathematics from Oxford University (and whose speaking voice sounds eerily like John Lennon’s), $1.2 quadrillion is the so-called notional value of the worldwide derivatives market. To put that in perspective, the world’s annual gross domestic product is between $50 trillion and $60 trillion.

To understand the concept of “notional value,” it’s useful to have an example. Let’s say you borrow $1 million to buy an apartment and the interest rate on that loan gets reset every six months. Meanwhile, you turn around and rent that apartment out at a monthly fixed rate. If all your expenses including interest are less than the rent, you make money. But if the interest and expenses get bigger than the rent, you lose.

You might be able to hedge this risk of a spike in interest rates by swapping that variable rate of interest for a fixed one. To do that you’d need to find a counter party who has an asset with a fixed rate of return who believed that interest rates were going to fall and was willing to swap his fixed rate for your variable one.

The actual cash amount of the interest rates swaps might be 1% of the $1 million debt, while that $1 million is the “notional” amount. Applying that same 1% to the $1.2 quadrillion derivatives market would leave a cash amount of the derivatives market of $12 trillion — far smaller, but still 20% of the world economy.

Getting a Handle on Derivatives Risk

How big is the risk to the world economy from these derivatives? According to Wilmott, it’s impossible to know unless you understand the details of the derivatives contracts. But since they’re unregulated and likely to remain so, it is hard to gauge the risk.

But Wilmott gives an example of an over-the-counter “customized” derivative that could be very risky indeed, and could also put its practitioners in a position of what he called “moral hazard.” Suppose Bank 1 (B1) and Bank 2 (B2) decide to hedge against the risk that Bank 3 (B3) and Bank 4 (B4) might fail to repay their debt to B1 and B2. To guard against that, B1 and B2 might hedge the risk through derivatives.

In so doing, B1 and B2 might buy a credit default swap (CDS) on B3 and B4 debt. The CDS would pay B1 and B2 if B3 and B4 failed to repay their loan. B1 and B2 might also bet on the decline in shares of B3 and B4 through a short sale.

At that point, any action that B1 and B2 might take to boost the odds that B3 and B4 might default would increase the value of their derivatives. That possibility might tempt B1 and B2 to take actions that would boost the odds of failure for B3 and B4. As I wrote back in September 2008 on DailyFinance’s sister site, BloggingStocks, this kind of behavior — in which hedge funds pulled their money out of banks whose stock they were shorting — may have contributed to the failures of Bear Stearns and Lehman Brothers.

It’s also the sort of conduct that makes it extremely difficult to estimate the risk of the derivatives market.

How Positive Feedback Loops Crash Markets

Another kind of market conduct that makes markets volatile is what Wilmott calls positive and negative feedback loops. These relatively bland-sounding terms mask some really scary behavior for investors who are not clued into it. Wilmott argues that a positive feedback loop contributed to the 22.6% crash in the Dow back in October 1987.

In the 1980s, a firm run by some former academics came up with the idea of portfolio insurance.

Their idea was that if investors are worried about their assets losing value, they can buy puts — the option to sell their investments at pre-determined prices. They can sell everything — which would be embarrassing if the market then started to rise — or they could sell a fixed proportion of their portfolio depending on the percentage decline in a particular stock market index.

This latter idea is portfolio insurance. If the Dow, for example, fell 3%; it might suggest that investors should sell 20% of their portfolio. And if the Dow fell 20%, it would indicate that investors should sell 100% of their portfolio.

That positive feedback loop — in which a stock price decline leads to more selling — boosts market volatility. Portfolio insurance causes more investors to sell as the market declines by, say 3%, which causes an even deeper plunge in the value of investors’ holdings. And that deeper decline leads to more selling. Before you know it, many investors are selling everything.

The portfolio insurance firm started off with $5 billion, but as its reputation spread, it ended up managing $50 billion. In 1987, that was a lot of money. So when that positive feedback loop got going, it took the Dow down 22.6% in a day.

The big problem back then was the absence of a sufficient number of traders using a negative feedback loop strategy. With a negative feedback loop, a trader would sell stocks as they rose and buy them as they declined. With a negative feedback loop strategy, volatility would be far lower.

Unfortunately, data on how much money has been going into negative and positive feedback loop strategies is not available. Therefore, it’s hard to know how the positive feedback loops have gained such a hold on the market.

But it is not hard to imagine that if a particular investor made huge amounts of money following a positive feedback loop strategy, other investors would hear about it and copy it. Moreover, the way traders get compensated suggests that it’s better for them to take more and more risk to replicate what their peers are doing.

Traders Make More Money By Following the Pack

There is a clear economic incentive for traders to follow what their peers are doing. According to Wilmott, to understand why, it helps to imagine a simplified example of a trading floor. Picture yourself as a new college graduate joining a bank’s trading floor with 100 traders. Those 100 traders each trade $10 million: They “win” if a coin toss lands on heads and “lose” if it lands on tails. But now imagine you’ve come up with a magic coin that has a 75% chance of landing on heads — you can make a better bet than the other 100 traders with their 50-50 coin.

You might think that the best strategy for you would be to bet your $10 million on that magic coin. But you’d be wrong. According to Wilmott, if the magic coin lands on a head but the other 100 traders flip tails, the bank loses $1 billion while you get a relatively paltry $10 million.

The best possible outcome for you is a 37.5% chance that everyone makes money (the 75% chance of you tossing heads multiplied by the 50% chance of the other traders getting a head). If instead, you use the same coin as everyone else on the floor, the probability of everyone getting a bonus rises to 50%.

When Traders Say ‘Jump,’ Risk Managers Ask ‘How High?’

Traders are a huge source of profit on Wall Street these days and they have an incentive to bet together and to bet big. According to Wilmott, traders get a bonus based on the one-year profits of those on their trading floor. If the trading floor makes big money, all the traders get a big bonus. And if it loses money, they get no bonus — but at least they don’t have to repay their capital providers for the losses.

Given that bonus structure, a trader is always better off risking $1 billion than $1 million. So if the trader, who is the king of the hill at the bank, asks a lowly risk manager to analyze how much risk the trader is taking, that risk manager is on the spot. If the risk manager comes back with a risk level that limits how big a bet the trader can take, the trader will demand that the risk manager recalculate the risk level lower so the trader can take the bigger bet.

Traders also manipulate their bonuses by assuming the existence of trading profits before they are actually realized. This happens when traders get involved with derivatives that will not unwind for 20 years.

Although the profits or losses on that trade have not been realized at the end of the first year, the bank will make an assumption about whether that trade made or lost money each year. Given the power traders wield, they can make the number come out positive so they can receive a hefty bonus — even though it is too early to tell what the real outcome of the trade will be.

How Trader Incentives Caused the CDO Bubble

Wilmott imagines that this greater incentive to follow the pack is what happened when many traders were piling into collateralized debt obligations. In Wilmott’s view, CDO risk managers who had analyzed a future scenario in which housing prices fell and interest rates rose would have concluded that the CDOs would become worthless under that scenario. He imagines that when notified of that possible outcome, CDO traders would have demanded that the risk managers shred that nasty scenario so they could keep trading more CDOs.

Incidentally, the traders who profited by going against the CDO crowd were lone wolves whose compensation did not depend on following the trading floor pack. This reinforces the idea that big bank compensation policies drive dangerous behavior that boosts market volatility.

What You Don’t Understand, You Can’t Properly Regulate

Wilmott believes that derivatives represent a risk of unknown proportions. But unless there is a change to trader compensation policies — one which would force traders to put their compensation at risk for the life of the derivative — then this risk could remain difficult to manage.

Unfortunately, he thinks that regulators aren’t in a good position to assess the risks of derivatives because they don’t understand them. Wilmott offers training in risk management. While traders and risk managers at banks and hedge funds have taken his course, regulators so far have not.

And if regulators don’t understand the risks in derivatives, chances are great that Congress does not understand them either.

The second debt storm

Who will bail out the countries that bailed out the world’s corporations?

Market Watch

The debt mountain that brought down some of the world’s biggest banks and dragged the international financial system to the brink ofsovereign debt disaster has simply shifted to governments. Now it’s threatening countries around the globe — and, if left unchecked, could rip the very fabric of Europe’s economic system and wreck economic recoveries in the U.S., China and Latin America.

The impact on markets has been severe. The euro has slumped more than 12% against the dollar since the sovereign-debt crisis flared in southern Europe. Gold has marched to new highs as investors seek a safe haven and, perhaps most alarming, it is now more expensive to buy insurance against national default than it is to insure against corporate failure.

“The sovereign-debt crisis spun out of control in the past week, and we see no easy way to resolve it,” said Madeline Schnapp, director of macroeconomic research at TrimTabs Investment Research.

Some investors and analysts are increasingly concerned that governments may be no more capable of repaying their debts than the banks and insurance companies they saved. And, they warn, if a major country comes close to default, it could trigger a financial meltdown that would eclipse the panic that followed the bankruptcy of Lehman Brothers in 2008.

The world has seen sovereign debt crises before. Latin America, Africa and Asia have all experienced upheavals sparked by excessive debt. These crises were all accompanied by stunted economic growth, inflation and weak stock market returns, which make it even harder to pay off debts. As investors and government officials ponder the current state of affairs, they see ominous signs that the developed world may be facing a similarly bleak future.

“The problem of the western world is that we have too much debt,” said Daniel Arbess, who manages the Xerion investment strategy at Perella Weinberg Partners. “Rather than reducing our debt, we’ve been moving it from one balance sheet to another.”

“All we’re doing is shifting chairs on the deck of the Titanic,” he added.

Europe’s bailout

Some governments have started to respond to market pressure, with the U.K. pledging billions of pounds in spending cuts this week. Spain and Portugal also unveiled austerity measures. But the problem is so big that investors remain wary. Check out Portugal’s plans.

Stock markets plunged and credit markets shuddered last week on concern Greece and other indebted European countries like Portugal and Spain might default. See the story on market impact.

“What’s happened on a corporate level is now happening on a national level. The first nation to experience this is Greece, but other nations will, too,” Schnapp said.

To stop Greece’s debt troubles turning into a run on the euro and a global stock market rout, the European Union unveiled an unprecedented package of almost $1 trillion in emergency loans, stabilization funds and International Monetary Fund support on Sunday.

In the days that followed, the European Central Bank bought the government debt of Greece and other countries on the periphery of the region’s single-currency zone, such as Portugal, Spain, Italy and Ireland, investors said. Such a drastic step has been shunned by the ECB until now. Read about the market response on Monday.

“Temporarily the crisis in terms of liquidity has been averted, but the underlying problem hasn’t gone away,” Schnapp added. “Giant debt and expenditures by governments are still there.”

TrimTabs cut its recommendation on U.S. equities to neutral from fully bullish on Sunday, in the wake of the European bailout.

Protection

The sovereign crisis has been brewing for months.

For much of the financial crisis, investors worried about financial institutions defaulting, rather than sovereign nations. But that pattern has been upended.

In early February, the cost of insuring against a sovereign default in Western Europe exceeded the price of similar protection against default by North American investment-grade companies. That was the first time this had happened, according to data compiled by Markit from the credit derivatives market.

More…