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It's Going to Be 2008 on Steroids

Phoenix Capital Research's picture




 

The 2008
Crisis occurred when private US banks became so distrustful of one another’s
balance sheet risk that interbank liquidity dried up triggering a systemic
implosion in the unregulated derivatives market, particularly in Credit Default
Swaps (which was a $50-60 trillion market at the time).

 

The Federal
Reserve dealt with this situation by suspending accounting policies (permitting
banks to lie about their true balance sheet risk), offering to backstop those
banks with the greatest derivative exposure (JP Morgan, Bank of America,
Goldman Sachs, and Citigroup), shifting trillions of dollars’ worth of toxic
debt to the US balance sheet and then funneling trillions of new dollars into
the banks most at risk of a derivative collapse (the banks I listed before).

 

In simple
terms, the Fed attempted to paper over the problems of insolvency that were
plaguing the large financial institutions. This scheme could have worked if the Fed had demanded that the large banks
decrease their leverage, cease making the deals that created these problems and
began regulating the derivatives market.

 

However, the
Fed is run by spineless academics not financial professionals or real
businesspeople. So the Fed did not implement any meaningful reform. All it did
was temporarily slow the pace of systemic implosion and give Wall Street a “get
out of jail free” pass.

 

From a
philosophical perspective, the Fed removed the notion of “risk of failure” from
Wall Street’s collective mind. As anyone who’s studied human behavior can tell
you, without consequence for one’s actions most people will take their bad
behaviors to the limit (I am not saying that there is no such thing as a
principled person or one who lives a moral life… but generally speaking, most
people, especially those who work on Wall Street where every move in focused on
making more money, will take things to the max).

 

As a result
of this, Wall Street went back to doing what caused the Financial Crisis in the
first place: increasing leverage, fleecing clients, and paying its employees’
excessive salaries.

 

As a result
of this, the financial system is once again overleveraged. Meanwhile, the large
banks continue to be insolvent due to their gargantuan derivative exposure. Put
another way, the financial system is primed for another 2008 episode. The very
same issues that caused 2008 remain in place. Leverage is far too high. And the
unregulated derivatives market remains a multi-hundred trillion dollar problem.

 

So this time
around it will sovereign nations collapsing instead of just US banks. Yes,
entire countries will default whether
it be Greece, Italy, Spain, OR the US. There is no way we’ll be paying our
debts off.

 

This in turn
will kick off another 2008 episode as all the over-leveraged players (read:
EVERYONE) will have to sell positions to meet margin/ redemption calls.
However, this time around we’ll also see civil unrest as people lose their
social safety nets (unemployment, social security, etc).

 

What will
follow will be the equivalent of 2008 all over again, along with food
shortages, civil unrest, outbreaks in crime, bank holidays, and the like. It
will, in short, be like what’s going on in the Middle East today (though NATO
won’t be bombing us).

 

If you’ve
not taken steps to prepare for the coming Crisis, you can download my FREE
report devoted to showing in painstaking detail how to protect yourself and
your portfolio from the coming ROUND TWO of the Financial Crisis (round one
wiped out $11 TRILLION in wealth).

 

I call it The
Financial Crisis “Round Two” Survival Kit
.
And its 17 pages contain a
wealth of information about portfolio protection, which investments to own,
which to avoid, and how to take out Catastrophe Insurance on the stock market
(this “insurance” paid out triple digit gains in the Autumn of 2008).

 

Again, this
is all 100% FREE. To pick up your copy today, go to http://www.gainspainscapital.com
and click on FREE REPORTS.

 

Good
Investing!

 

Graham
Summers

 

PS. We also
offer a FREE Special Report on the inflation situation in the US. This other
FREE Special Report, The Inflationary
Disaster
explains not only why inflation is here now, why the Fed is
powerless to stop it, and three investments that absolutely EXPLODE as a result
of this.

 

All in all
its 14 pages contain a literal treasure trove of information on how to take
steps to prepare AND profit from what’s to come. And it’s all 100% FREE.

 

To pick up
your copy today, go to http://www.gainspainscapital.com
and click on FREE REPORTS.

 

 

 

 

 

 

 

 

 

 

 

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Fri, 07/15/2011 - 13:55 | 1460218 MiningJunkie
MiningJunkie's picture

http://www.shamelesspump.com

Tyler get rid of this repetitive drivel!

Fri, 07/15/2011 - 13:40 | 1460172 Bob
Bob's picture

Wow, I read it in 5 seconds.  Yup.  Then the pitch. 

Whatever.

Fri, 07/15/2011 - 13:28 | 1460126 YesWeKahn
YesWeKahn's picture

Your rating keeps decreasing. Do you know why?

Fri, 07/15/2011 - 12:57 | 1460015 Robslob
Robslob's picture

Couple of thoughts:

Gold might sell off with everything else

>>>

Everyone runs into Gold

>>>

Gold goes through roof

>>>

Market hates this and tanks even more

>>>

Interest rates sky at the exact wrong time; Market also hates this and tanks even more

>>>

Gold bugs begin to sell overvalued Gold for undervalued assets

???

Fri, 07/15/2011 - 12:21 | 1459859 Sambo
Sambo's picture

There will be QE3. Your scenario might play out in 2012 after the elections, not before. Ron might win and if he does, I expect TPTB will do someting in a knee jerk reaction that will collapse the world financial system (which almost happened in 2008).

Fri, 07/15/2011 - 12:00 | 1459750 skepticCarl
skepticCarl's picture

The Phoenix Capital random word generator must be low on fuel, as this is one of the lamest recycling of the tired, worn-out warnings regarding our lousy economy.  At least have a human editor read this stuff before printing, and add some bit of new, relevant material.

Fri, 07/15/2011 - 13:46 | 1460189 s2man
s2man's picture

Yeah, I wouldn't have clicked if I had noticed it was Phoenix Capital

Fri, 07/15/2011 - 11:49 | 1459682 r101958
r101958's picture

And then we'll all be Goldman Sucks' subservient sheeple slaves.

Fri, 07/15/2011 - 11:50 | 1459670 dark pools of soros
dark pools of soros's picture

time sell a few bits of silver and gold and totally get away from any stocks at all..and put the money into more rations, good tools/machinery, and all the tuna, etc you can stock up on

Fri, 07/15/2011 - 14:34 | 1460363 Temporalist
Temporalist's picture

Nouriel Roubin says Spam...I'd go with dried goods like beans, rice, corn, flour, oats, and water filtering supplies.

Fri, 07/15/2011 - 14:55 | 1460428 slowimplosion
slowimplosion's picture

It's hard to beat Spam for caloric density and shelf life.  All that salt ya know.

 

Trust me on this, I've done it - beans and rice (dried versions) won't keep long, especially beans.

Fri, 07/15/2011 - 11:08 | 1459385 bill1102inf
bill1102inf's picture

Goldman Sucks will be short every single share of every single stock before the market crashes. And afterwards? They will pay off all our debts the world over.

Fri, 07/15/2011 - 10:56 | 1459321 SheepDog-One
SheepDog-One's picture

'Though NATO wont be bombing us'...yea I wouldnt be so sure of that.

Fri, 07/15/2011 - 11:09 | 1459388 SeverinSlade
SeverinSlade's picture

No, DHS will just arrest any "enemy combatant" (i.e. REAL patriots) and send them to FEMA camps. 

But you're right, if it gets ugly enough we already know that foreign troops WILL be deployed on US soil to quell dissent.

Fri, 07/15/2011 - 10:39 | 1459275 yabs
yabs's picture

I hope you are righht but you have been saying this for years Graham and here we are S and P at over 1300

Fri, 07/15/2011 - 14:13 | 1460280 Temporalist
Temporalist's picture

It seems to me that S&P higher correlates perfectly with the thesis...just the timing of collapse is unknown.

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