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How to Prepare For Round Two of the Great Crisis

Phoenix Capital Research's picture




 

In order to understand why there will be a second round to the Great Crisis, we first need to understand why Round 1 (2007-2009) occurred. And that cause can be explained in one simple word: derivatives.

 

As their name implies, derivatives are securities that are “derived” from underlying assets (homes, debt, etc). While they are technically considered “assets” by the financial community, the fact is that they’re primarily financial instruments that  Wall Street created to foist on their clients while collecting even larger fees.

 

Indeed, if you need proof that derivatives are in fact just Wall Street “make believe” consider that the Street refuses to allow the derivatives markets to be regulated in any way (if the value of these “assets” was clear, they could be traded via a clearing house).

 

As stated before, derivatives are nothing more than fiction (perpetuated by another fiction: that Wall Street is able to value these things or price them accurately).  But thanks to Wall Street’s lobbying power, they’ve become the centerpiece of the financial markets.

 

Consider that the world stock markets are roughly $36 trillion in size. The world bond market is roughly $72 trillion in size. The derivatives market, in contrast, is currently in the ballpark of $600 TRILLION in size.

 

If these numbers scare you, you’re not alone. As early as 1998, soon to be chairperson of the Commodity Futures Trading Commission (CFTC), Brooksley Born, approached Alan Greenspan, Bob Rubin, and Larry Summers (the three heads of economic policy) about derivatives. She said she thought derivatives should be reined in and regulated because they were getting too out of control. The response from Greenspan and company was that if she pushed for regulation that the market would “implode.”

 

Remember, this was back in 1998: a full DECADE before the Crisis occurred. And already, the guys in charge of the markets knew that derivatives were such a big problem that trying to regulate them or increase transparency would destroy the market.

 

So why are these items so accepted? Well, for one thing Wall Street makes $35+ billion per year from trading them, so it has a powerful incentive to keep them untouched. But organizations around the world (companies AND countries) love them as well because they can use them to hide their real liabilities (in the case of Greece and Italy) or to juice earnings: very likely most large publicly traded companies out there have used derivatives at one point or another to massaged their numbers.

 

All of this came to a screeching halt in 2008, when private US banks became so distrustful of one another’s balance sheet risk (due to derivatives exposure) that interbank liquidity dried up, triggering a systemic implosion for a particular type of derivative called Credit Default Swaps (which was a $50-60 trillion market at the time).

 

The US 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.

 

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.

 

As a result of this, Wall Street went back to doing what caused the Financial Crisis in the first place: creating derivatives, increasing leverage, fleecing clients, and paying its employees excessive salaries. Meanwhile, the US’s public balance sheet has become contaminated by the toxic derivatives that the Fed transferred from Wall Street to Uncle Sam.

 

To be fair, the US was already bankrupt before the Fed did this. However, between all the Wall Street bailouts, ($16 trillion and counting) stimulus efforts, and Quantitative Easing (QE) the US has crossed over from “overly indebted” to the “going to default.”

 

When the US does default is when the Second Round of the Great Crisis will hit. At that point the financial systems/ economies of entire countries, not just private banks, will collapse. 

 

What will follow will be the equivalent of 2008 on steroids featuring market crashes, debt defaults, civil unrest, food shortages, spikes in crime, etc. The purpose of the reports is to help you prepare for all of these items.

 

Regarding preparing your loved ones/ family for these items, there are three key actions to focus on. They are:

 

1)   Stockpiling food

2)   Buying physical gold/ silver

3)   Having actual cash on hand to use if the banks close for a “bank holiday”

 

All of these moves are low risk investments. The worst thing that can happen is if I’m wrong, you’ve got food on hand, some bullion, and some cash: all items you can use even if the system continues to operate as usual.

 

BUT, if the system fails again, or another Round of the Crisis hits, these small steps of preparation literally could save you and your loved ones from immense hardship. How many people do you know who could actually get by if the banks closed for a week? How many people do you know actually have food on hand?

 

Personally, I’d say it’s less than 1% of my contacts. And yet, when it comes to investing some money… food/ water, physical gold/silver, and cash are three of the safest, least risky investments you can make.  They cover all your bases in the event of a Crisis.

 

If you’re looking specific portfolio moves to prepare for the Second Round of the Great 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, 07/29/2011 - 08:42 | 1503953 Danny Noonan
Danny Noonan's picture

This guy serious? 

Fri, 07/29/2011 - 08:32 | 1503893 jkruffin
jkruffin's picture

People should have put any cash they have into a credit union a long time ago.......if they are still in one of the TBTF banks, they deserve to lose their money.  I moved mine out of BofA as soon as I saw how idiotic that bank was...

Fri, 07/29/2011 - 08:16 | 1503866 Conceptwizard
Conceptwizard's picture

Family of Four for one year.

 

300 lbs of rice

250 lbs of flour

350 gallons of drinking water with water sterilier on hand

barter items on hand, whiskey. toilet paper etc

some preious metals

freeze dried foodstuffs

yeast for brewing.baking

wood for heat

guns and ammo...lots

seeds....

dried fruit  and so on......

If your not ready your a fool..

Fri, 07/29/2011 - 10:32 | 1504596 tempo
tempo's picture

Thanks for the supplies the intercity gangs will enjoy them while they play with your wife and kids.

Fri, 07/29/2011 - 08:08 | 1503850 Implicit simplicit
Implicit simplicit's picture

Exacto righto. Derivatives, Brixley Summers etc.. It won't be long before protests in Germany will recuire their banks to take a hit off the "bank austerity" bong pipe, along with the other over-leveraged world big banks. The shatner really hits fin at that point

Fri, 07/29/2011 - 08:03 | 1503835 Zero Govt
Zero Govt's picture

 

Stock piling food ?!!

Maybe Mr Summers can state one instance in history where food was at a shortage due to economic contraction? ....you've 2 million years of modern ape-man to pick a single lone example to support your food scare

when economic Merry Hell arrives it will be all that is Govt and its hanger-on parasite businesses that fails, trips over its size 19 clown boots and crashes face first into the cow crap

the free market is flexible, resilient and frankly unstoppable (including the food chain) isn't that right Mr Hysteria?

Fri, 07/29/2011 - 08:30 | 1503887 problemfixr
problemfixr's picture

Well I'm certainly not one to carry water for Mr Summers, however he is not alone in his assumption that there will be food shortages.  The reason for shortages vary widely, however there is a large contigent of fairly bright people, Jim Rogers being one, who agree with coming shortages.  I would suggest searching Youtube for "Food Shortages" to gain some insight.   

Peace

Fri, 07/29/2011 - 09:45 | 1504209 DosZap
DosZap's picture

Americans do not understand our FOOD DELIVERY systems.

We are on the 3 Day supply routine, stores routinely carry a 3 day supply, for normal traffic.

The Distribution Whses, have a three week supply.

Where the rub will come, is the 3 day supply will be gone in less than 24hrs in a crisis(or percieved one), and the three week supply will be snatched up as soon as it can get to stores, assuming it's not jacked first.

This in turn causes a shortage, since we are  an Urban peoples now, we must truck/rail our food back into the Dist centers.

This takes time.....................time folks w/ no food do not have.

Also, look for the flash mobs to hit most stores and steal what they can carry, before the military can mobilize and martial law instituted.(local LE will not be able to handle it)

 

Fri, 07/29/2011 - 21:48 | 1507071 slowimplosion
slowimplosion's picture

People who don't understand the BASICS about food are asking to starve.  Famines have occured throughout history over a lot less than economic collapse.

Fri, 07/29/2011 - 07:45 | 1503824 westboundnup
westboundnup's picture

You're absolutely correct that you can't lose by doing basic prep.  I've found that, by far, the most difficult form of prep, is getting mentally and emotionally ready for collapse.

Fri, 07/29/2011 - 07:07 | 1503785 MiningJunkie
MiningJunkie's picture

Blah blah bah then blah blah blah blah and also blablablablah BUT MOST IMPORTANTLY, BUY MY NEWSLETTER SERVICE.

 

Fri, 07/29/2011 - 00:41 | 1503417 lolmao500
lolmao500's picture

If banks close... ya think it'll be worth something to have cash on hand when the sheeple run amok and start looting grocery stores?

Fri, 07/29/2011 - 08:26 | 1503877 KnightsofNee
KnightsofNee's picture

Cash on hand, sitting barricaded in your apartment with cash in hand while the sheeple go crazy and start looting. When they start going feral and looking for stockpiles of food and the big bang at your door, throwing cash at them won't protect you. Item number four is missing in the stockpile list, a mini 14 and lots of .223 FMJ boat tails.

Just saying.

http://www.google.com/imgres?imgurl=http://4.bp.blogspot.com/_Zdl_6xufJk...

 

Fri, 07/29/2011 - 09:12 | 1504073 Zedge Hero
Zedge Hero's picture

You are right on,  bullets may go farther than bullion.  Wild West anyone?

http://www.youtube.com/user/zedgehero

Fri, 07/29/2011 - 00:11 | 1503338 RockyRacoon
RockyRacoon's picture

Check, check, and check.

Ready and willing to participate in The Great Debacle.

Do NOT follow this link or you will be banned from the site!