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SYSTEMIC RISK IS ON RED ALERT
Since 2009,
I’ve been warning that systemic risk remains high. However, from that time
until today, investors have been willing to bet on the US Federal Reserve (and
the world’s central banks) keeping a lid on things.
Until today.
Greece has
erupted into full-scale, violent riots that could shut down the entire
Government there. SHOULD this happen it’s the beginning of the END GAME for
central bank intervention in the financial system.
Let me
explain.
The only
thing that has maintained investor confidence since the depths of 2009 is the
belief that the central banks can continue to bailout/ intervene to control any
financial problem.
Remember, we
never actually “took the hit” we needed to take in 2008. The same junk debt remains
in the system (it’s just been hidden by loosened accounting standards). The
same enormous derivatives time bomb is still ticking (it’s over $600 TRILLION
in size).
None of
these problems were solved. None were even addressed. All the central banks did
was lend more money to the insolvent big banks. Well, that and damage their
sovereign balance sheets by taking on a ton of garbage debt (the Fed’s balance
sheet is now over $2.8 TRILLION in size).
So in plain
terms, the central banks took systemic risk that existed in the private sector
and allowed it to spread to the public sector.
What does
this mean?
That the
next Crisis won’t just involve banks like Goldman Sachs, it will involve entire
countries (including the US) going belly-up.
We’re already
seeing it in Greece. That situation has made it very clear what happens when
you combine public outrage with Government bankruptcy and systemic insolvency: SHUT-DOWN.
This IS
coming to the US. And it won’t be long. Once the bailout wagon stops (first in
Greece) the ensuing collapse will spread VERY quickly. The reason is quite
simple: Greece is the Bear Stearns of the Sovereign debt Collapse.
So buckle
up, because it was only six months or so after Bear Stearns that the Lehman
disaster unfolded. Given the amount of leverage in the system today, we could
easily see the issues hitting Greece today arriving at the US’s shores before
the year’s end.
So if you’ve
not taken steps to prepare for the coming Crisis, you NEED To download my FREE
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Good
Investing!
Graham
Summers
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Whenever I see this number, I wonder if the author knows what they are talking about. Someone please correct me if I am wrong, but isn't the 600T of derivatives the notional value, not the nett value?
I know that derivatives markets have long/short bias, but I just can't imagine the majority of the world's financial institutions not being hedged out of the 10 delta either way, which would make the nett value of the world's derivatives market about 60T even in the most extreme of circumstances. Okay, that's a large number. Even the unwind would destroy financial markets, BUT, nearly half of the world's derivitave markets is IR swaps (310 Trillion see: http://en.wikipedia.org/wiki/Interest_rate_swap#Market_size), and most of those are less than 50 bps, and often the notional is not even swapped, only the coupon.
So, I would say the systemic risk from derivatives markets is probably only about 6T on a worldwide basis. Not chicken shit, but not SIX HUNDRED TRILLION DOLLARS either.
Even that 6T won't disappear into thin air. Financial markets are zero-sum. The money goes somewhere, just that it's usually not to me. :(
Off Topic:
Meet the new boss...
same as the old boss...
I hope they have enough doubles of the new boss to go around.
on wires
*ECB wants to increase bailout fund
EUR sold on news.
Now it's time to Dance. ASIA swinging into Europe, on low volume. Below 400!
I give it 5 years before the U.S. collapses.
You're the only optimist on ZH
CY,
Let's say your timeframe is in the ballpark...So, in your opinion, how long will the collapsing last?
Are you in fact saying it is happening and that it will run for five years before the END?
Perhaps you could tell this idiot (I mean me) how much au ag I (and my family) have to hoard to be able to last five years?
I know I will need 20,000+ bullets...
20,000 - well thats a lot of shootin' !
The only reasons for ammo are to trade, to defend, to hunt for food, to provide a forcible egress.
10 shots a day for five years...
You guys are nuts. What good is a precious metal going to do you if the economy collapses? People talking this way believe that the power grid will remain on, governments will stay intact and planes will still be flying.
I would spend my time learning how to shoot, meeting my neighbors, learning how to farm, build, dig and preserve. If precious metals were to do any good you would have to have physical possession and in that event you will just be robbed.
You can't figure out a way to profit from an all out collapse. Survive yes, profit no!
Psquared,
Most are still looking to trad for profit...Agree with you, when the power grid collapses, you cannot trade easily, and barter (at gun point) would just invite robbery...and when robbery runs rampant, even gold and silver may not be helping much with the daily survival.
Profits have been made from every collapse. Precious metals will return as money, I mean hello. If you don't "get it", you don't "get it".
In a partial collapse, you can. Total collapse, no- but you can have investment capital for what comes after, when it is time to rebuild.
You know silver was money 5,000 years ago in Egypt. I think that would qualify as a "total collapsed" society with slaves and no power, and desert...
"You can't figure out a way to profit from an all out collapse. Survive yes, profit no!" I Agree however, I do disagree about PM's though. Gold / silver has historically been used as money. You will still need to barter during a collapse. PM's can be part of the barter in some circumstances.
"You can't figure out a way to profit from an all out collapse. Survive yes, profit no!" I Agree however, I do disagree about PM's though. Gold / silver has historically been used as money. You will still need to barter during a collapse. PM's can be part of the barter in some circumstances.
Just remember to never carry with you more than you can afford to be robbed of. Community ties are important. I have neighbors that have gardens as well as mine and a dairy farm a 1/4 mile up the road. Deer are plentiful where I am, until everybody has to hunt, but there is still rabbit and other small game you can raise.
Whether it is gold, silver, palladium or any other metal/protection
from inflation, remember these are all non-tangibles. Their sole value derives from the
existence of services or commodities they can be switched over. So in the event of a serious economic collapse, they may well be useless as a store of value.
If you have to use your PM's to buy food or other supplies, then you didn't plan very well.
Even so, for example: TP is a disposable product -- gonna fill yer entire house with it?
Anyone watching the Fort Calhoun, NE Nuke Plant that is at a Stage 4 alert? Not covered by any news media for some unknown reason!
http://news.lucaswhitefieldhixson.com/2011/06/new-aerial-photos-of-fort-...
I noticed that too. I'm unfamiliar with USNRC levels for categorizing incidents so I have no idea what a "level 4" alert is, but it's been going on for 10 days and the FAA has closed the airspace 2 miles around the nuclear plant.
+1 Though not much meat in this piece Graham. Stuck with you for a long time now, and it is as you say with the additional confusion of unpredictable timelines on the events about to unfold.
The thing about unpredictability is that the first shock event often induces a strong reaction to counter it in the opposite direction, so instead of falling like dominoes as expected, we may get interference that delays the inevitable. Most people have no idea what it will mean for Greece if they default, get kicked out of the EMU, and go back to their Drachma on an exchange rate that will cripple their purchasing power for a long time. I shudder to think of the chaos of its early days of transition and what it might mean for people who depend on the state for their daily bread. There probably aren't very many Greeks left alive who remember 1944 when they changed from old drachmae to new at an exchange rate of 50,000,000 to 1. And again in 1954 at an exchange rate of 1000 to 1. I fear it's going to be much, much worse when they revert back from the euro to their drachma.
All those cheering the Greeks standing up for their right to refuse a bailout, kicking the evil bankers out, and refusing to pay their creditors might sing a different tune when they actually see how bad things can be without sovereign credit. I just hope it won't be a humanitarian nightmare on Europe's doorstep, but hoping isn't going to change reality. The outcome of Greece may well induce a reaction from the countries now considering default to introduce severe austerity measures that merely delays the pain further until one day the whole edifice built on debt comes crashing down as we all expect it will.
I believe we are about to see some type of nasty dictatorship form in Greece.
Phoenix capital Research is mainly an advertisement for it's newsletter...........period. I'm thinking ......why buy gold or silver when ammunition will be a great trade good as well as good liquor........?
A .5mL bottle is just under two shots, and most of the popular names are about $.99 each. Got loads of those stashed away for trade, too.
Lead will get delivered air mail.
And if there isn't SHTF then you can still drink the liquor. No downside either way.
@"None of these problems were solved. None were even addressed. All the central banks did was lend more money to the insolvent big banks. Well, that and damage their sovereign balance sheets by taking on a ton of garbage debt (the Fed’s balance sheet is now over $2.8 TRILLION in size).
So in plain terms, the central banks took systemic risk that existed in the private sector and allowed it to spread to the public sector.
What does this mean?
That the next Crisis won’t just involve banks like Goldman Sachs, it will involve entire countries (including the US) going belly-up."
.
comment: i would add that the systemic risk was also
transfered back to the private sector, but a different
part of the private sector, a different class of the
private sector; so "government" has become an instrument of an elite class that has this power, rather
than an instrument of the "people". fascism is the word and if it be it need be destroyed as a matter of the law of the land. imo
You wrote: " 'government' has become an instrument of an elite class that has this power, rather
than an instrument of the "people".
Yes, it's fascism, per Mussolini, who came to power in 1922. The term fascisti means tightly tied bundle of sticks, where the sticks are government closely tied to big business. Cheney and Rumsfeld are prime examples pre-2008; thereafter, Blankfein and Dimon. Creeping authoritarianism is giving way to creeping totalitarianism in the home of the brave, where we tremble at phony TV images -- Platonian shadows on the cave wall... tell ourselves we number one, that we are free.
Good comment.
End TBTF and the Fed.
Systemic risk = lack of Fed ponzi funding.
May be if they dye all the junk paper and mash it up, they could sell it on the streets as weed...
I'm wondering why this guy has 3.5 stars? His predictions of time are obviously worthless HOWEVER everything else he says is SPOT ON. DUH.
6 months until the USA faces a solvency crisis like Greece? I don't think so. I'd give it at least a couple years...
We are already insolvent, today. It's all a confidence game. Once the attitude changes, watch out. It could happen over a weekend.
In any event, a few years? I can't agree, far too long.
Yep, in Argentina, things were going along kinda like here now. Then, they wake up one morning, banks are closed, and the economy has collapsed. Over nite. And we have so many similarities to Argentina, it's amazing. Argentina's trading partner was the US, and the peso and the dollar were artificially pegged. Our trading partner is China, and the dollar and yuan are artificially pegged. Many other similarities.
Your'e right about much EXCEPT when and IF it will come ashore in the disUnited States.
This country isn't beanbag.
It's fucked up beyond all recognition BUT it isn't some lazy-assed island in the middle of an ocean with a people that haven't worked at real jobs in hundred years.
When a PRODUCING country goes belly up THEN we can begin to listen to the chicken littles of the world.
Side Bet: Not this year, not next year, not in the foreseeable future will what you predict come to pass here. Whaddayasay? Three Gold bars. Deal?
"BUT it isn't some lazy-assed island in the middle of an ocean with a people that haven't worked at real jobs in hundred years."
Yeah, we haven't been abusing the world's reserve currency. We haven't been exporting worthless paper in exchange for real goods. We have a ton of manufacturing capability, so we'll be fine for a long time yet. /sarc
I'd say at least a couple weeks, maybe as much as 3-6 months. You're not gonna believe how fast this happens if Greece defaults. The whole Bond Bubble will pop, and it will not be pretty. A stampede to get out of dollars might be the way to describe it.
But...They're workin' on WW3. Both China and Russia have given us ultimatums, and we just invade more countries. Pakistan (and it's benefactor-China) is the scary part.
"Remember, we never actually “took the hit” we needed to take in 2008..."
this is the most astute statement made in many a moon.....i said it in 2008 and stand by it still in 2011....i stated in the beginning that until the dow hit 5000 or less, then we have not cleaned up the crap and cancer infesting the host....
welfare for banksters must end.
tony,
And like this wasn't pre-planned?.
As sure as God made green apples.
We are / have been murdered while we await the goon squads.
We berate the Jews(who were dead wrong) for not fighting, or leaving enmasse.........and, WE are guilty of the same shit.
Color us Stupid.
yes, the Dow did briefly fall down into the 6-thousands... but the BAILOUTS for BANKSTERS kicked in to high gear. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a9MTZEgukPLY#
(it's) simply amazing how many MILLIONS of Americans don't realize that just because They SAY "STIMULUS!" doesn't mean that they have ANY intention of actually improving the economy: IF they CAN GET AWAY with STEALING TRILLLIONS by PRETENDING they are concerned with the (real) economy, they will KEEP DOING SO UNTIL CONFRONTED.
the worst part is, the Evil goddamn-sachsers (RADICAL Right-Wing financial predators & parasites) are not only INTENTIONALLY WRECKING the economy (that should be treason)... but they are BLAMING "Liberals" and Keynsians!
Keynes said "when the economy is in the trash, DO WHAT IT TAKES to PUT PEOPLE TO WORK.
The goddamn-sachsers (the bob rubin crew: larry summers, petey orszag, mary schapiro, gary gensler, econ hit man timmy giethner, ben Bernakisatan) just KEEP STUFFING MORE CASH (government DEBT, = taxpayer DEBT!) in their gs, jpm, bankster pals' pockets - and PRETEND that it is "KEYNSIAN STIMULUS" spending!
This is such a SIMPLE scenario, a shame that even ZH doesn't quite grasp it.
+
++++10 = Sachsers
Not that they are not all assbites. Gotta have somone to pawn the blame onto. Oh yeah, I forgot it's the teachers & fireman who screwed this all up.
True That .... At least Keynsian "gov't make work projects" actually create something tangible for the trillions spent. there would be employed people improving infrastructure, rather than huge bankster bonuses. Then we could at least bitch about people suckling on the gov'ts teet while the roads got fixed instead of POMO for the banks putting the taxpayer in debt.
Careful what you wish for. Satan is in the details of Infrstructure spending and investment.
The way it would roll out if it were to come to pass is, Lord Blankfein, Jamie Dimon and the other Masters of Universe, would cut themselves in for hefty fees, and bonuses the likes of which will make the trillion paid them so far look like petty cash, and probably mount themselves on some Grand Canyon Mountain, as the saviors of the Union.
You can only win one way with these characters: Destroy them.
Agree.
SOME ASSHOLE ON CNBC JUST SAID "THIS WAS AN UNEXPECTED EVENT."
Wait, I'm the asshole, I'm watching it......
Sounds like Barney Frank 2008
YAWN......
Summer correction. Sure, all those problems remain, but none of us will be alive when the shit finally hits the fan.
I didn't say we'd die of natural causes however.