Greece just took a hit… and once again it’s depositors that will take it on the chin. But this process is only just begun. Similar Crises will be spreading throughout the globe in the coming months.
The time to negotiate the Greek referendum this Sunday has come and gone and at this point, one can only sit and wait as the vote results start trickling in on Sunday evening. And, as Goldman's Huw Pill prudently observes, the outcome of Sunday's Greek referendum is uncertain. "Regardless of the outcome, Greece will continue to face substantial economic dislocation in the shorter term." What is interesting is that Goldman says "Greece will ultimately remain in the Euro area even in the event of a ‘No’ vote."
With Sweden's QE Officially Broken, The Riksbank Doubles Down: Lowers Rates Even More Negative; Boosts QESubmitted by Tyler Durden on 07/02/2015 08:04 -0400
Overnight the Riksbank confirmed that it neither learns from its own mistakes, nor reads BIS reports when at 9:30 CET, it shocked central bank watcher all of whom were expecting no rate change from the bank, and announced it is not only engaging in yet another rate cut, taking the key rate even further into record NIRP territory, from -0.25% to -0.35% but adding insult to broken QE injury, it would expand its QE by a further SEK 45 billion starting in September. The reason? Sweden is realizing it is losing the currency war (to a great extent due to its failed QE which is pushing bond yields higher and with it, its currency) and it needs to soak up even more collateral... which can barely be found.
This is the question that astute investors are forced to ask themselves these days. No reasonable person believes that a system of ever-expanding debt can resolve painlessly. It simply cannot happen... not, at least, until 2+2 stops equaling four. But the international money system, while deeply interconnected, can implode in sections. In fact, it’s highly unlikely that it will crash as a single unit. So, if you have significant moneys to invest, you end up coming back to our question: Who will be the last to crash?
It’s all so very 1914-ish. Draghi’s cap on bank-supporting Emergency Liquidity Assistance (ELA) is the modern day equivalent of Czar Nicholas II’s troop mobilization. Good luck walking that back.
As Foretold In 2010, Greece Was GUARANTEED to Default Regardless Of Any Aid It Received and These Countries Have Similar IssuesSubmitted by Reggie Middleton on 06/29/2015 12:57 -0400
Regardless of what package the Troika (or China or Russia) would have ever given Greece, the endgame would have always been full tilt default. This can be mathematically proven. There are also about 14 other countries with similar characteristics - all easily seen with just a modicum of insight and research. Just as easy is the ability to avoid the inevitable capital controls and bank bail-ins that the Greeks are subject to now.
The next round of the great crisis is here. 2008 was just A Crisis… we've just begun THE Crisis.
"More cynically, if a default of bank liabilities is inevitable, it may deem it better to ensure that domestic claimants on Greek banks switch into hard 'convertible' Euro banknotes (or offshore accounts), leaving the residual claimants (the ECB which has provided ELA funding) to take the loss."
We cannot forget that crisis is in itself a distraction as well. Whatever pain we do feel tomorrow, or the next day, or the next decade, remember who it was that caused it all: the international banks and their globalist political counterparts. No matter what happens, never be willing to accept a centralized system. No matter how reasonable or rational it might sound amid the terror of fiscal uncertainty, never give the beast what it wants. Refuse to conform to the dialectic. This is the only chance we have left to get back to true prosperity. Once we cross the line into the realm of worldwide institutionalized interdependency, we will never know prosperity or freedom again.
If you jump off of a make believe cliff, don't be surprised when you hit the reality of the ground! Reggie Middleton
For a glimpse of what happens next, look no further than Sweden.
“There are three things that matter in the bond market these days: liquidity, liquidity and liquidity. When the unwind comes, like we’ve seen in the past few months, it comes abruptly and sharply as the exit door is tiny"...
Greece, Europe and the world are being crucified on a cross of Keynesian central banking. The latter’s two-decade long deluge of money printing and ZIRP has generated a fantastic worldwide financial bubble, and one which has accrued to just a tiny slice of mankind. That much is blindingly evident, but there’s more and it’s worse. The present replay of high noon on Greece’s impossible mountain of debt clarifies an even greater evil. Namely, that the central bank printing presses have also utterly destroyed the fundamental requisite of fiscal democracy. To wit, in the modern world of massive, interventionist welfare states, fiscal governance desperately needs an honest bond market.
“Systemic risk is in the system [and] we are in uncharted territory. Think about holding other assets. That could mean precious metals, it could mean physical currencies.”
There are large signs of stress now present in the credit markets. You might not know it from today's multi-generationally low interest rates, but other key measures such as liquidity and volatility are flashing worrying signs. While some may hope that rising yields are signaling a return to more rapid economic growth, or at least that the fear of outright deflation has lessened, the more likely explanation is that something is wrong and it’s about to get... wronger.