The Eurozone created several economic asymmetries between Germany and other European countries. Germany is an export powerhouse replete with high wages and low production costs. The euro imposed a monetary straightjacket on all countries, irrespective of what monetary policy was best for which country. Low interest rates set by the European Central Bank (ECB) wreaked havoc by sparking real estate bubbles and debt-financed consumption. Now the PIIGS (Portugal, Ireland, Italy, Greece and Spain) are dealing with the consequences while Germany is being essentially forced to foot the bill.

On top of all the public and private debts accumulated thanks to the ECB’s low-rate policy, there are vast amounts of monies promised to aging beneficiaries of Europe’s social welfare programs. The number of active workers will shrink, and the number of retirees will rise, hampering the ability of governments to fulfil their obligations. Northern Europe has been subsidizing Southern Europe’s excess consumption for years. The PIIGS countries have run large current account deficits throughout the existence of the Eurozone. These structural pressures may simply be too much to bear.

No matter how much bailout money is committed to the program, unless massive structural changes occur, the Eurozone economy will continue to deteriorate. The big danger is that the wealthier northern countries like Germany will start experiencing problems due to contagion spreading from the PIIGS in the south. Ultimately, the Eurozone is doomed to experience a break-up, likely precipitated by Germany or Greece leaving the euro. Once that happens, the economies of all European countries will likely enter a prolonged readjustment phase. In other words, a new recession, which will likely drag the rest of the world down into it as well. The inevitable end result will occur sooner or later whether the participating countries like it or not.

My name is Nisha Sharma. I represent a site called ClearDebt.co.uk. I love to write, especially about travel, finance and business advice. Feel free to visit our site for more information on IVA and credit card debt

Whispers of a double dip recession have started to circulate and not without good reason. There seem to be few, if any reasonable indicators left out there that are pointing to a continued recovery, and even those areas that had been showing a significant turn around are beginning waver and break.

1. Existing Home Sales

While it seemed we had finally reached a bottom in the plunging housing market, trouble signs are beginning to reappear in real estate. With the massive 27% drop in existing home sales since last year, there appears little if any reason to expect a rebound in home prices anytime soon. Even with home prices lower than they have been in years, the expiration of the homebuyer’s tax credit has left buyers with little incentive to purchase right now, and sellers left wondering if it’s time to lower prices again or just walk away from their properties completely.

The qualms felt in the real estate market are in turn having ramifications among other areas of the economy. Besides pushing more homes into foreclosure and lowering the net worth of homeowner’s, these fears are affecting consumer confidence as well. And with fewer people out there buying goods and utilizing services, companies are in turn lowering prices to induce spending, leaving the spectre of deflation looming.

2. Market Factors

Being on the cusp of the fall season means September, and in particular October, are right around the corner. Historically, these have not been the most awe inspiring of months for the stock market, even when times are good, let alone when the economy is struggling to recover. The stock market’s rise last year has been tempered this year with concerns regarding the economy. With an optimistic earnings season largely come and gone, the markets now seem to be teetering on the brink of a strong plunge to the downside. Many feel that with last year’s market comeback and this year’s ability to maintain most of those gains, the market may be overbought and ripe for a pullback.

It likely won’t take much in terms of bad news over the next several months or so to send the markets cascading downward. The buillishness of earlier this year is starting to sway, which is not surprising considering the poor economic news that continues to be reported on a regular basis. This seasonal aspect of stock market worry, paired with a weak real estate market soon to be entering the winter months, could be enough to force us into a double dip recession. While in a stronger economy a market swing might not have as large an impact upon the economy, these days it is being watched closely by many as an economic signal to cut and run.

3. Unemployment

While the government might want us to all think the unemployment rate is holding steady at 9.5%, and maybe even dropping a tenth of a percentage point here and there, many of us aren’t fooled by these numbers. We are seeing just how the unemployment rate can be skewed by the recent effects of the drop off in temporary census employees. And if consumer confidence remains low, affecting retail sales into the holiday season, we might not see the seasonal workforce pick up as it normally does, hurting employment numbers even further. With the total unemployed and underemployed numbers typically hovering lately between 16-18% or thereabout, the real numbers of those who are looking for full-time work remains depressingly high.

4. Fear and Pessimism

If we want a true indication as to whether a double dip recession is imminent, we should really turn to those around us. Just take a moment and read the comments at the end of just about any economy related news story online, and you’ll begin to get a sense for the American sentiment as to where the economy is heading. While there may be a few positive comments here and there, you’re more likely to find a number of negative comments full of fear and pessimism ranging from everything from the stock market, to housing market, job market to manufacturing numbers.

If we’ve learned anything from the recession, it may be that following the lead of others (i.e. buying homes because everyone tells us they’re a good investment) is a bad idea. However, much can still be learned from the sentiment of the masses. Ask friends and family what they’re doing with their money, how or whether they’re spending surplus cash, if they’ll be buying a new car this year or building up their savings account instead. You’ll likely find a multitude of sobering responses to your questions, and responses that will provide a much more honest and accurate view of the current economy and where it may be headed than any government statistic will provide.

Tom Becker is a freelance writer specialising in personal finances who writes for Money Choices about online savings accounts and various other financial products.

In this first column, I would like to touch on a statistical number that is grossly misrepresented in the pop media, how it should be interpreted, and how to apply a new understanding what it means to your personal finance planning.

Recently at GetRichSlowly.org , JD wrote about the personal savings rate (PSR).  I had previously written on the personal savings rate here , but let’s start off with what’s going on with the PSR.

The Bureau of Economic Analysis reports the PSR.  In their news releases is embedded a definition of this calculation, which isn’t what we’d think it is, since it says “Savings”.

The PSR measures:

(Personal After-Tax Income minus Personal Outlays) / (Personal After-Tax Income)

Included in Personal Outlays would be things like 401Ks, Roths, CD, Stocks, Bonds, Commodities, etc.  But aren’t these considered to be savings?  Not by the PSR, because you have to outlay cash to buy them!

In short, the personal savings rate doesn’t measure savings! It’s more a measure of cash-flow

In actuality, savings rates could be going up as we cut back on disposable consumables (likely a good thing), or it could also be that consumers have stopped contributing to the 401ks (likely a bad thing) and the real savings rate is lower.  What is known is that however we’re saving; we’re saving with less risk (and less return).

Let’s wrap this back into what it means for you, the personal finance blog reading consumer.  What you know from this statistic is that the typical American consumer is keeping more greenbacks in the bank or in their mattress (By the way, this also nicely explains why inflation hasn’t gone up much).  Further, it may mean that consumers are moving out of riskier savings vehicles and deciding to spend some money on consumables and keep the remainder in very safe low yield accounts.

For the Personal Finance blog reader, what does PSR mean to you?  For most folks, the PSR increases reflect the current uncertain economic situation and “emergency funds” are more funded these days.  Of course, if you already had a well-funded emergency fund, then you might want to consider a different reaction.  If my conjecture above is correct that investment activity is lower now as consumers substitute 401K savings or bond savings to cash-like savings, then follow Warren’s advice to “Be greedy when others are fearful”as there would be a greater chance of some good long-term investments  being sold at a wonderfully reduced price.  Further, the PSR appears to be continuing to rise. You can bank on the current economic climate continuing beyond the next 12 months pretty certainly based on this.

Next week, I’ll cover just what the real story is behind the mysterious Unemployment Rate and why it shouldn’t be used to measure how the economy is at this very moment.  Controversial statement, but I will explain it neatly.  As a teaser, did you know there are 6 different versions of it?  Which one is reported?