This page has been archived and commenting is disabled.
How the Collapse Will Play Out and How to Play For It
As I’ve noted in recent missives to you, the world financial system has begun the Great Collapse: the Crisis I’ve been warning about for over two years. I wanted to take some time to explain what is going to be coming this way
The first wave is going to come from Europe where it is clear that the ECB has reached the End Game of monetary intervention. Germany has said “NEIN” regarding further bailouts for Greece. No German backing… no bailouts… no EU.
So Greece will default. And the bondholders will take a 50% haircut if not more. But Greece is the last of Europe’s worries. Indeed, there is a MUCH bigger problem here and that problem is the same one that created the 2008 disaster: DERIVATIVES.
US commercial banks have over $200 trillion in derivatives outstanding on their balance sheets. However, worldwide, the derivatives market is over $600 TRILLION in size. And the financial system in Europe is as saturated, if not MORE saturated with toxic debt than the US financial system.
According to the Bureau of International Settlements, the total exposure worldwide to PIGS (Portugal, Ireland, Greece, and Spain) debt is over $2.5 TRILLION. Most of this is in the form of derivatives. And 70% of it is from foreign entities (banks and firms located outside of the country).
Let’s take Greece for instance. Courtesy of derivatives, France has $92 billion in exposure to Greece debt. Germany is on the hook for $69 billion. Great Britain has $20 billion. And the US has $43 billion.
These levels, while dangerous, are not catastrophic. As I’ve stated before, Greece is NOT the big problem for the EU. However, worldwide exposure to Greek debt is in the ballpark of $277 billion. So a default there would result in significant market dislocations.
Now consider the exposure to a BIG Problem such as Spanish debt. In this situation, Great Britain is on the hook for $51 billion. The US is on the hook for $187 billion. France is on the hook for $224 billion. And Germany is on the hook for a whopping $244 billion.
As I said before, Greece is ultimately a small player in this mess. Worldwide exposure to Greek debt is $277 billion. Worldwide exposure to Spain, on the other hand, is north of $1 TRILLION.
Now this is where things get REALLY tricky. Because of the intertwined nature of the derivatives market, a Greek default could result in systemic risk for the simple fact that if one of the banks that goes down with Greece has extensive exposure to Spain as well, then things could get ugly very, VERY fast.
We are close DARN close to this happening. And when it does, we’re going to see a Crisis that makes 2008 look like a picnic.
If you have yet to prepare yourself for what’s coming, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.
Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).
Best of all, this report is 100% FREE. To pick up your copy today simply go to: http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab.
Good Investing!
Graham Summers
PS. We also feature four other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s my proprietary Crash Indicator which has caught every crash in the last 25 years or the best most profitable strategy for individual investors looking to profit from the upcoming US Debt Default, my reports covers it.
And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com.
- advertisements -
Keep watching. In the recent criminal takedown of silver and gold, people were trying to buy physical in hordes, but availability was terrible. As Max said, it is failure to deliver physical that will ultimately take down the JPM and the manipulators. Also note the ever-declining physical backing the paper markets, as reported by the paper markets (not conspiracy theorists).
Of course, JPM will not be hurt financially. Why? Because they're doing this at the request of the federal reserve, who happily compensates them for all paper losses with newly created digital non-money.
1
Vote down!
-1My recent quite succesful research that lead to successful prediction of Silver (in March 13) and Gold (in May 6th) spot price movements over last 6 months in these silver and gold price charts:
Silver prices 2011-2013
Gold prices 2011-2013
and further analysis has lead to a conclusion-explained here:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2860#p34267
That:
an interesting hypothesis emerges that , starting from q2 2012, in H2 2012 commodity prices in USD will rapidly converge towards a certain Bancor equilibrium for the first time, and than fluctuate around it in future, where:
1) the price of paper USD will be de facto determined by amount of a commodity it can buy in this equilibrium rather then the commodities price is as to today will be determined by the value of a certain currency set by exchange rates;
2) In fact, it will be the basket of all commodities that will serve as the ultimate reference medium of exchange for all paper currencies, and will de facto replace thus USD as world reserve currency;
3) the USD price ratios between different commodities will change so that to reflect the monetary ability (i.e. availability, longevity) of a given commodity to be the part of this world reserve currency, exchange medium for trade, not only its utility. Hence the price ratios IN USD between different commodities may differ quite radically ( as seen in example with gold/silver ratio and silver/copper price ratio) from what they are today;
4) if the logic of exchange medium effect on USD price ratio formation between commodities in USD can be discovered, the prices of commodities in USD can be quite accurately predicted after H2 2012, and ratios may not fluctuate as much as in USD as reserve currency time;
5) In such case, the prices in USD of other assets (land, houses, food, produce, etc) relative to commodities (and, of course, USD ) will also move from their current ratios to represent their potential as exchange medium for trade.
The signal for such conscious or partly conscious move to de facto Bancor system of international reserve currency will be triggered by official data of recession in q1 2012 in the USA (predicted here:DJIA 2011-2012 and the recession in the USA in q1 2012) and the resulting obvious unsustainability of USA debt ( it has already entered bubble precrash phase in 2000, as shown here: USA debt is forming a very soon precrash pattern) which will continue to grow superexponentially ( that is , in equivalent subsequent periods of time increases of debt value in USD will continue to grow) and imminent default (crash correction ) of the USA on its debt in near future.
Eurobonds - with pictures of former European visionaries; Napoleon, Czar Nicholas, King Louis XVI, etc.
Still wondering why the banks have to take the rest of us with them when they collapse?
New Rule: Shoot a banker today
as derivatives go, so goes your "money market" account.
US commercial banks have over $200 trillion in derivatives outstanding on their balance sheets. However, worldwide, the derivatives market is over $600 TRILLION in size. And the financial system in Europe is as saturated, if not MORE saturated with toxic debt than the US financial system.
uh NO not true because us banks net the derivative exposure you are not see all the derivatives, they are hidden in the offset. fuck ill bet the the fed even has a shit load of derivative exposure not being talked about
Eurobonds is like Queen Guinevere and the Knights of the round table. She was supposed to be picture perfect. In fact she fell for LAncelot. It brought down that civilization. Our queen Guinevere for all those knights of Euroland looks like that beautiful Queen of all CDOs, the EFSF! New queen, new quest of euro holy grail! Will Greece be Mordred, illegitimate son of King Arthur of EU?
These Phoenix screeds are about as canned as the Mogambo Guru's. "Total Fed Credit was up by $21 billion this week. Yow! We're TOTALLY FREAKIN' DOOMED! I'm heading into the Mogambo Bunker of Doom (MBD), take my wife, please!"
+1 on the MG. He's a Major Friggin Deuche (MFD) Man this investing stuff is easy! Oh, and he bears a slight resemblance to Donald Sutherland.
I thought I knew what financial literary pain really was, after repeatedly reading the Mogambo Guru .... but then I read Jon Nadler, and discovered a whole new level of mental agony and anguish.
Fhoenix Fear Quotient - 98%
please pass the spaghetti à la vongole, the cassoulet, the paella, the goulash and the sauerkraut. And the sachertorte. Life will still be fun without the euro. Bread will cost less and petrol/gas will cost more. Go long bicycles!
Well, somebody wanted my (adult sized) bicycle. I ride to work twice a week for exercise, and someone swiped it from my driveway recently. I'm buying a new one next week.
The latest craze here in SoCal is a bike with a teeny 30cc chainsaw-style motor on it (with appropriate muffler to keep the noise down) that fits sleekly within the frame and allows for pedal-free travel on level (non-hilly) roads. And because it's under 50cc, there's no registration or smog requirements!
Well, yet, anyway. The bloodsuckers in Sacramento (state level) or L.A. (county/city) will find some way to regulate it and make you pay... but for now, it just might be a way to go. :)
STOP Don't buy next week. I've had an electric bike for over a year. It's quiet and doesn't burn gas. I get 20 miles to a charge. If you're near Ventura go to Coast Carts on Thompson. If not check out battery bikes on line. I love it. Top speed. 18 mph
Dos Zap go electric. I don't know the brand. The local company's name is on the bike. Costs about a k.
What brand, cost, etc?
Please.
Most Americans would rather starve than ride a bike. Sad but true. And even if you GAVE them a bike, they are so out of shape that they would go into cardiac arrest after the first 10 miles.
All the Hispanic illegals here in the burbs ride bikes - 'cause it's hard to get a drivers license. These guys work hard and come from pretty minimalist backgrounds. Most are far better equipped to survive than the people whose lawns they cut. Ironic, huh?
These are facts.
At our house, we have 7 bicycles. We are ready.
You also need Beans, Bullets, and Bullion. Please note that people will kill you for a bicycle if it comes to that.
Aw-shucks, people will kill you for nothing at all. People are just crazy that way.
What about Eurobonds?
That was easy. Problem solved.
ECB Eurobonds will happen. There is no other way to keep the party going.
When those $600T(+/-) of Fx (mostly denominated in USD/Euro) and interest rate swaps start creating big institutional winners and losers (like right now) what do you think is going to happen?
Ben effortlessly creates $16.1T in swaps and credit lines in the 2008/2009 'crisis' and NO ONE would have been the wiser if that loudmouth senator Bernie Saunders and those perrennial shitdisturbers Ron Paul and Alan Grayson didn't start asking questions. Ben's creativity should prove to be an inspiration to the ECB.
You honestly believe that eurobonds can keep the party going? that's about like saying the guy going to get another keg got in a car accident but we have 2 cups of beer left so the party is still on....
You thought greece had some schitzo yield and price fluctuations on it's bonds? You ain't seen nothing yet if they do eurobonds....Is it greece, or is it germany?
Is it greece, or is it germany? Is it greece, or is it germany? Is it greece, or is it germany? Is it greece, or is it germany?
Long enough for our bankers to avoid taking big losses, make their last round of bonuses, distribute the remaining equity to the shareholders in the form of a non-taxable dividend payment, and leave the continent for sunnier and safer climes.
It is fall after all is it not?
Without an ECB backed bond issue the $600T to $1Q derivatives market implodes very soon and everyone becomes very anxious and unhappy. Later is better, yes?
Exactly correct, Herr Kitler. It is ruin now or ruin later with more funds stashed safely. The choice is clear. The looting will continue for as long as it can.
As much as all quote Warren Buffet, he has always warned about derivatives.
Now we need some claw backs from the banker cartel.
Agree Eurobonds will happen, but when... Im sure that without a major disaster happening first, nothing will be accomplished in Europe. If no disaster => Eurobonds will take several years since a lot of fiscal (and thus political) issues have to be solved. Very very tough job. If there is a disaster (not a greece default, but something more unexpected, like a default of a big bank or a 3-notch downgrade of France that blows up the EFSF), then there will be enough pressure on the ignorant and incompetent politicians to set aside their pride
Extending and pretending are the two remaining pillars of our global economy. We require that disaster now, and Greece will be that disaster. It's merely the Germans we need to get onside after all.
Perhaps the engineered failure of a small German bank will suffice?
Germans care not a whiff for the troubles of the French after all.
Eurobonds will be just more debt to fix the problem of excessive debt. This is not fixing the problem, it is extending and pretending.
That's right it is extending and pretending. The Germans will be brought along.