Debt crisis jolted West economy in 2011

The foundations and structures of Western economies are looking more unstable than ever before in the past 20 years, due to the debt crisis in the US and Europe, an economic analyst say.

According to the editor of the state-funded BBC World Service business programs, Martin Webber, the past decade or so has seen an explosion of the “enjoy now, pay tomorrow” culture in the US and Europe.

Currently the United States national debt stands at 15 trillion dollars, which means 50,000 dollars of debt for every American citizen.

Meanwhile across the eurozone, individual shares of government debts are at 35,000 dollars and Britain’s government debt is not far behind at the equivalent of 30,000 dollars per citizen.

In 2011, The US high national debt cost it top triple-A credit rating from Standard & Poor’s, one of the world’s big three rating agencies.

Since the 1990s, the growth of debt went hand in hand in Europe and America with the growth of so-called universal banks.

The Universal banks have combined investments banking, which involves taking big financial risks, and retail banking that looks after the savings of ordinary customers and small businesses.

It is not shocking that the universal banks are under heavy pressure and may need to be rescued again, like they were saved during the financial crisis of 2008.

“Banks have become far, far too complex. Many of the world’s biggest banks are out of control. Even their top management doesn’t quite know exactly what’s going on,” Michael Lafferty of financial consultants the Lafferty Group said.

“We are going to see bank collapses, we are going to see a massive banking crisis across several countries in Europe and indeed further afield over the year ahead. Banks are desperately scrambling at the moment to raise additional capital,” he added.

Europe has for months grappled with an economic and financial crisis. Insolvency now threatens in-debt countries such as Greece, Portugal, Italy, Ireland and Spain.

The worsening debt crisis, however, has forced European governments to adopt harsh austerity measures and tough economic reforms. Tens of thousands of Europeans are migrating from their homelands as a result of these difficulties.

There are fears that more delays in resolving the eurozone debt crisis could push not only Europe, but also much of the rest of the Western world back into recession.