Forget Greece, EUROPE is Finished

Phoenix Capital Research's picture

Let’s take an honest look at Europe.

Merkel and Sarkozy claim they’ve got everything under control. They’re lying. Anyone who uses common sense can tell this. The reason…

They’ve never considered the true price tag for the leveraged EFSF. I’m not talking about money, I’m talking about funding costs for France and Germany when they lose their AAA rated status as a result of backing up Greece.

First off, while France and Germany are the most solvent members of the EU, they’re not exactly models of fiscal austerity. Consider that both countries officially have Debt to GDP ratios of roughly 80% (Germany’s is 78% and France’s is 84%). And that data point doesn’t include off balance sheet risk or unfunded liabilities for either country.

Indeed, Germany, which is widely thought to be super solvent, is in fact sitting on a REAL Debt to GDP ratio north of 200% when you consider unfunded liabilities such as pension plans and so on.

Before you label me as crazy, consider that this statistic comes from Axel Weber… the head of Germany’s CENTRAL BANK (Bundesbank).

Folks, this is a CENTRAL BANKER, admitting his nation is in fact far more broke than people realize. And let us not forget…


Indeed, by the German Institute for Economic Research’s OWN admission, German banks need 147 billion Euros’ worth of new capital.

To put this number into perspective TOTAL EQUITY at the top three banks in Germany is less than 100 billion Euros.

Debt to GDP ratios north of 200%... banks needing 147 billion Euros in new capital… and somehow Germany is going to bailout Europe? Give me a break. German has its own fiscal disaster approaching.

Not to mention the following:


1)   Over half of Germans want out of the Euro

2)   75% of Germans are against increasing the bailout fund.

Of course, there is no limit to political idiocy, so it’s possible German politicians may go “all in” to prop up Greece. But I’m here to tell you that the short term upside to this move is minimal as it will result in Germany losing its AAA status and will only speed up its own funding crisis/ banking collapse.

In plain terms, Europe is finished. This isn’t even about Greece anymore. Even the most stable and “solvent” European nation (Germany) is facing its own funding Crisis. So the notion that Germany and France (which has an even worse REAL Debt to GDP than Germany) can somehow bailout Europe is ridiculous.

With that in mind, the time to prepare for what’s coming is NOW before this situation results in systemic failure in Europe.

Yes, systemic failure.

Greece is not the issue here. The issue is that Europe as a whole is broke, facing massive unfunded liabilities, and running out of viable creditors to band-aid its banking crisis. We are literally talking about a banking system collapse over there.

In plain terms, what’s coming to Europe (and then the US due to the interconnected nature of the financial system) is going to make 2008 look like a picnic.

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John_Coltrane's picture

I believe the author is advocating the "long" rifles, "short" handguns pairs trade in his newsletter, which has worked for over 100 years.  "Short" rifles, "long" handguns, is insanity itself unless you really dig Thomson Center Contenders chambered in 30-06, which I do and actually own!

Hope this helps to clarify and/or obfuscate this article for everyone.

haibop's picture

this is an interesting opinion. Power4Home

malek's picture

Indeed, Germany, which is widely thought to be super solvent, is in fact sitting on a REAL Debt to GDP ratio north of 200%

Hooray, someone get's it!!!

StychoKiller's picture

In other news, the chemical compound, H2O is found to cause moistness.

John_Coltrane's picture

Isn't the H2 part of that H2O stuff really explosive too?

Spigot's picture

IMO the European Union is more like the USA pre civil war where the states were much stronger and the federal government much more limited. Only in this case the EU monetary union treaty really does not require/allow individual States to be responsible to other State's financial malfeasience. However, the "strong" States in the EU seem to believe it is their obligation to do spite of the idiotic path this will lead the entire EU down.

Germany and France will be destroyed in their internals by taking on the southern PIIGS liabilities. Plain and simple, German and France might as well have just bought all of southern Europe bonds at face and loaded their balance sheets with this crap debt. Call it good.

Fact is its an infection. The infection is government spending. The southern tier has infected all of europe with their liabilities.

We could call this a STD - State Transmitted Disease.

Georgesblog's picture

This is the end of the debt game that I was talking about in "Land & Wealth vs. Debt & Promises: The End Game", back in 2007. It is playing out, exactly as it has to.

Problem Is's picture

"Greece is not the issue here."

"What the fuck are you talking about?"

"The chinaman is not the issue here, Dude."

"I'm talking about drawing a line in the sand, Dude. Across this line, you DO NOT... "

"Donny (Phoenix Capital) you're out of your element!"

"Dude, the Chinaman is not the issue here!"

MiningJunkie's picture

Keep posting all of these uber-bearish doom-and-gloom stories cuz whenever you stop bashing the markets, they go straight south. We are heading to all-time-highs in EVERYTHING denominated in FIAT, just like Zimbabwe and the Wiemar. Get rid if that cash NOW because it is being devalued in front of your "Sky-is-Falling" faces...

PulauHantu29's picture

"Lots of taxpayer money with few strings attached" according to Richard Koo...

Read more: Ready for that $220 oil?
Börjesson's picture

I do wish people across the pond would learn to distinguish between the euro zone, the EU and Europe as a whole. The terms are not interchangeable! (Which isn't to say that the rest of Europe won't be hit hard if the euro zone goes belly up, of course.)

RichardENixon's picture

Isn't Europe that place where they play a game where they kick a ball back and forth and never bathe? Or is that France?

JustObserving's picture

And why beholdest thou the mote that is in thy brother's eye, but considerest not the beam that is in thine own eye?

US debt and unfunded liabilities are increasing at $1 trillion every 42.4 days (  Just because we keep unfunded liabilities off our books (like our wars), they don't disapper.  Medicare will be bankrupt by 2017.

If you had half a clue, you would know we are in much worse shape that Greece, let alone Europe.  But you insisit on drinking the koolaid.


ivars's picture

his is reposted from here, but may be interesting, as I currency pairs, groups will long term tell a lot what is going to happen in this unipolar  world when its major reserve currency collapses in 2016  ( after the other, EUR, will start collapsing already in early 2012 but French and German and some other strong Northern countries start to clean Eurozone up):

I have considered GBP/USD - but not in too great detail- can someone present me with the most advanced financial charting and analysis soft

From what I have considered, it seems (but I have to check, too many charts, I also want to be able to study ratios (not only forex-any) charts of even triple ratio charts or triple surface charts (1 price as function of 2 others)  with movable/stretchable time scales, log-log plots etc) that after Eurozone final cleanup in 2013, from 2014 GPB will be pegged to the USD in rather narrow 0,71 GPB per USD +-2% corridor. in 2016, with USA default, GBP will obvioulsy move up into 0,5 GPB per GPB within 2 years. Before 2014, GPB will be also stable to USD at 0,62 GPB per USD, but inflationary pressures will mount.

Also, relatively stable vs. USD during 2014 will be CHF and especially CAD. JPY may even grow from 2013 vs, USD. The big sufferer in USD index is EUR.

One more interesting thing ( I have not been able to make any meaningful assessment of Yuan) is that one currency that will appreciate against USD starting already from 2014 will be PLN, and perhaps, CZK. What it tells, is, that not only these countries have developed good industrial base in post soviet years, but also, that GERMAN economic machine will be running full speed after 2013 German federal elections (between 1 September and 27 October 2013) adn expose confidence that it will continue running . From the chart I had published earlier elsewhere:

USD per EUR 2011-2018


One can see that something happens during early 2013 and than especially in end of 2013 when EUR temporarily takes back lost ground to USD. One of the possible reasons is that French elections in 2012 gives hope, while German in end of 2013 seals EUROZONE cleanup act in what ever form. After that , from UDS per EUR graph its clear, that, either as usual , promises are not kept or new factors arise that makes impossible for them to be kept ( and forces US to peg to USD to stoke inflation).

Such ideas about GBP, etc. I will come with more graphs as soon I am able to make them( takes DAYS of working itme/chart)


SheepDog-One's picture

Yep Europe is fucked, so is the U.S. now what? Same as it ever was....World War next.

walküre's picture

Why isn't anyone talking about Chi Chi China? Have we simply accepted that a centrally planned communist state that doesn't comply with even the most basic of accounting standards is going to get away unscathed?

The Chinese accounting standard is this: Today is great, Tomorrow is greater. Growth galore and nothing else will do. No true growth? Make it up as you go and build buildings with no purpose. Pay the people with a currency that has never been audited, never been floated.

I'm wondering seriously why Chi Chi China that produces more engineering failures than any other industrial nation is not being scrutinized more? Who cares if they have a billion or more people, most of them live in the Dreck. Who cares if they supply all the world with consumable cheaply made fare when that can easily be produced elsewhere or is simply not vital to our daily lives?

Folks, Europe is not finished. The US is undergoing a tremendous amount of change which is long overdue. You all know that the American Dream is long dead and that most Americans only wish they had access to a European welfare system where everyone has at least equal chance to survive. European leaders may not be capable to resolve the financial crisis but they will be able to support their societies in the long run and will have the political will to feed and care for their own people.

Not so sure about the US being able to pull that off to be honest. The US is made up of 1% "Winners" and 99% "Loosers" or so the common thought process goes. There are "food stamps" for the "Loosers" so they won't go hungry and get crazy ideas like going after the 1%. But God forbid, the 1% should entertain to share their wealth and lift the 99% into decent paying jobs. Instead the 1% outsourced all manufacturing to China where people are living like Dreck and willing to work for nothing.

Nobody ever looks at the overhead when they say that production in America is not competitive. They all look at the hourly wage of the slave labourer but never look at the billions of dollars that the top executives are "earning" off the backs of the cheapest slaves.

Everything is on the table, folks. Not just banking execs are what makes the top 1%.

buyingsterling's picture

The 1% are making rational (if selfish) decisions with their money. They aren't investing it into new businesses because they can make more money in the rigged markets. Financial markets once supposedly existed primarily to allocate capital efficiently, now most of the money churning through them has nothing to do with productive endeavors. Add the allure of taxpayers backstopping your mistakes, and why would anyone with a lot of money be looking to put it into new businesses in disintegrating America? It's easier to be a parasite than a creator.

DaBernank's picture

We do talk about China in the China posts, and the US in the US posts. Of course the US is as fucked as everybody has said for years but when people flee out of equities, they need cash and that means USD strengthens. Of course China's accounting is fucking bullshit and, as is germane to this post, Europe will start getting way more nationalistic and if the ECB starts printing, Germany drops the Neu-DMark on our asses... BOOM! Über Alles, bitchez.

Gunther's picture

Axel Weber WAS president of the Bundesbank.
He resigned April 30, 2011.

Last time I checked Germany was net creditor to the Eurozone and had some 5 trillion Euros in savings. That needs to be added for perspective.

malek's picture

As some people will learn the hard way, being a creditor doesn't do you much good if the debtor won't pay you back...

RockyRacoon's picture

Define "savings".   You mean the people's money?  Isn't that a problem?

kaiten's picture

I think I heard this already.

Quinvarius's picture

There is only one way out for the status quo.  They are going to print. This is the big solvency/fake deflationary crisis everyone said would come before the sovereign debt crisis would finally be solved via printing.  WTF else are they going to do?  The people with printig presses need more money.

Herman Strandschnecke's picture

Tyler, I should point you and others' to this youtube euro discussion posted 14th October. It has over 11k hits, goes on for nearly two hours but worth viewing for the true insight. Mentions; 'where is the gold? Gold backed currencies and the solution to Europes woes-hopefully. v=426xE48MSlM&src_vid=4HlzozqfIdU&annotation _id=annotation_267150&feature=iv

Fuh Querada's picture

The above post is a smokescreen. If you want qualified EU coverage, subscribe to the LEAP newsletter, of which the first few pages are published monthly here

Also recall Jim Rickards' dictum, repeated ad nauseam in his Twitter posts and King world news interviews,  that EU banks and bonds may crash, but this does not mean that the EUR as a currency will disappear. Failure to make this distinction  might be quite expensive.

CvlDobd's picture

The above posts are a smokescreen and a mirror. If you want real guidance in life, subscribe to Maxim!

yabyum's picture

Virgil, So are we(US)

falak pema's picture

eu banks are finished. Yes. But life continues. Government intervention will become the norm. We will go protectionist big way. Not a good spiral, but thats the price for this Oligarch/government collusion. Will there be retribution/justice after meltdown and austerity against Oligarchs and cronies? That is important to do before we go back to reset and restart.

MGA_1's picture

Nah.. certainly stormy seas ahead, but I think they are gonna pull it off - of course not without a hell of a lot of money printing.  I think they'd prefer to hang together rather than break up the Euro.

ratso's picture

Your article is just more scaremongering.  I assume the answer is buy gold.


Give me a break PLEASE!

IQ 145's picture

Actually, the answer is Buy Silver; sorry there are no breaks available. Reality is a bitch.

TeresaE's picture


Wow, delusion dies a hard death.

Europe is toast.

We are toast.

Prepare and gain a hope of survival, or demonize the messengers and enjoy your upcoming pain.

At least my eyes are open and I won't spend the first few days/weeks after collapse trying to wrap my brain around what happened.

I read history, I KNOW what comes next.

So do Germans, which is why their people OVERWHEMINGLY reject the print money scenario.  Not that it will do them much good.

SheepDog-One's picture

'Scaremongering' boo hoo hoo!

MFL8240's picture

Add the US to this group.

digitlman's picture

This guy is full of shit.

Problem Is's picture

"Blah, blah, blah, blah..."

Buy our "free" report...

Phoenix Capital: Try the GM Used Car Salesman Approach:

"What do we have to do to get you into a subscription for our newsletter today?"

Ghordius's picture

Come on, it's the trade of the time!

Whatever makes the USD stronger is ok at the moment.

I just hope it's not a swan song...

virgilcaine's picture

Europe is finished, literally.

Azannoth's picture

This might take longer than people expect but Europe as a concept is trully finished, actually I hope it takes a bit longer so I can take my ass out of here before it all crashes and burns