Chris Martenson: "We Are About To Have Another 2008-Style Crisis"

Tyler Durden's picture

Submitted by Chris Martenson

Get Ready: We’re About To Have Another 2008-Style Crisis

Well, my hat is off to the global central planners for averting the next stage of the unfolding financial crisis for as long as they have. I guess there’s some solace in having had a nice break between the events of 2008/09 and today, which afforded us all the opportunity to attend to our various preparations and enjoy our lives.

Alas, all good things come to an end, and a crisis rooted in ‘too much debt’ with a nice undercurrent of ‘persistently high and rising energy costs’ was never going to be solved by providing cheap liquidity to the largest and most reckless financial institutions. And it has not.

Forestalled is Not Foregone

The same sorts of signals that we had in 2008 are once again traipsing across my market monitors. Not precisely the same, of course, but with enough similarities that they rhyme loudly. Whereas in 2008 we saw breakdowns in the credit spreads of major financial institutions, this time we are seeing the same dynamic in the sovereign debt of the weaker European nation states.

Greece, as expected and predicted here, is a right proper mess and will have to leave the euro monetary system if it is to have any chance at recovery going forward. Yes, all those endless meetings and rumors and final agreements painfully hammered out by eurocrats over the past year are almost certainly going to be tossed, and additional losses are going to be foisted upon the hapless holders of Greek debt. My prediction is that within a year Greece will be back on the drachma, perhaps by the end of this year (2012).

Greek default spectre turns material

The weekend Greek revolt against the austerity measures imposed on its economy in return for eurozone funding has elevated the prospect of a Greek default on its debts or a chaotic exit from the eurozone.


The collapse in support for the mainstream parties that had reluctantly accepted the austerity program and the vehement opposition to the measures by the radical left party that finished the runner up in the weekend’s elections has made it almost impossible for a coalition to be formed that would persevere with the program.


It is likely new elections will have to be held next month but given the degree to which Greeks have protested against the harsh eurozone prescriptions – and the 20 per cent shrinkage in GDP and 20 per cent-plus unemployment that has accompanied them – it is improbable that Greece will continue with the reforms it agreed in return for the next $300 billion tranche of eurozone funding.


If it does walk away from that commitment there will be chaos in Greece and, to a lesser extent, elsewhere. Greece would inevitably default on its debts and could be forced to quit the eurozone.


There really is no choice for Greece but to leave the euro, and the sooner, the better. Even then, there is a lot of hardship coming their way. But in my estimation, that’s better than the imposed austerity that is a guaranteed torture chamber. The institutions that avoided taking losses on their Greek debt on the first pass through, due to their preferred status in the process (the ECB among them), are almost certainly going to eat big losses this time, perhaps a full 100% of them.

Leaving the euro is going to be quite a process, and the ripple effects are going to be large and somewhat unpredictable. I found this description of what will happen within Greece and its banking system to be well on the mark:

The instant before Greece exits it (somehow) introduces a new currency (the New Drachma or ND, say). Assume for simplicity that at the moment of its introduction the exchange rate between the ND and the euro is 1 for 1. This currency then immediately depreciates sharply vis-à-vis the euro (by 40 percent seems a reasonable point estimate). All pre-existing financial instruments and contracts under Greek law are redenominated into ND at the 1 for 1 exchange rate.


What this means is that, as soon as the possibility of a Greek exit becomes known, there will be a bank run in Greece and denial of further funding to any and all entities, private or public, through instruments and contracts under Greek law. Holders of existing euro-denominated contracts under Greek law want to avoid their conversion into ND and the subsequent sharp depreciation of the ND. The Greek banking system would be destroyed even before Greece had left the euro area.

There would remain many contracts and financial instruments involving Greek private and public entities denominated in euro (or other currencies, like the US dollar) that are not under Greek law. […] Widespread defaults seem certain.


Euro area membership is a two-sided commitment. If Greece fails to keep that commitment and exits, the remaining members also and equally fail to keep their commitment. This is not just a morality tale. It has highly practical implications. When Greece can exit, any country can exit.


As soon as Greece has exited, we expect the markets will focus on the country or countries most likely to exit next from the euro area. Any non-captive/financially sophisticated owner of a deposit account in that country (or in those countries) will withdraw his deposits from banks in countries deemed at risk - even a small risk - of exit.


Any non-captive depositor who fears a non-zero risk of the future introduction of a New Escudo, a New Punt, a New Peseta or a New Lira (to name but the most obvious candidates) would withdraw his deposits from the countries involved at the drop of a hat and deposit them in the handful of countries likely to remain in the euro area no matter what - Germany, Luxembourg, the Netherlands, Austria and Finland.


The ‘broad periphery’ and ‘soft core’ countries deemed at any risk of exit could of course start issuing deposits under English or New York law in an attempt to stop a deposit run, but even that might not be sufficient. Who wants to have their deposit tied up in litigation for months or years?


The Greek banking system will be destroyed immediately upon Greece’s exit from the euro, but the banking system there is already all but dead anyway. Best just to sweep the floor clean and start over.  The idea is easy enough to understand; if your bank is about to go under, it is best to get your money out before that happens.

The only mystery to me is why so many people have left their money in the Greek banks this long. I suppose they were waiting for a clearer signal? Well, it would seem that the signal has now been sent and received:

Greek Depositors Withdrew $898 Million From Banks Monday

Greek depositors withdrew €700 million ($898 million) from the country's banks on Monday, fueling fears of a bank run amid the growing political disarray.


With deposits falling, Greek banks become even more dependent on the European Central Bank to meet their funding needs, exposing the central bank to potentially huge losses if Greece leaves the euro area.


Monday's deposit withdrawal far outpaced Greek banks' steady decline in deposits since the start of the country's debt crisis in 2009, as depositors withdraw cash and transfer funds overseas. In the past two years, deposit outflows have generally averaged between €2 billion and €3 billion a month, though in January they topped €5 billion.


The latest data from the Greece's central bank show that total deposits held by domestic residents and companies stood at €165.36 billion in March.


Again, the real mystery to me is who still has 165 billion euros in Greek banks at this stage of the game?  Also a mystery is why Greece has not yet imposed a withdrawal moratorium and capital controls?  It is only a matter of time, perhaps days, before they do.  

Of course, it is the contagion effect that most worries the market, because the same dynamic of utter insolvency leading to the intractable nature of Greece’s dilemma applies to Spain, Portugal, and Italy.

Indeed, the market is already adjusting to this possibility, as evidenced by the spikes in the yields of those country’s bonds:

Contagion Fears Hit Markets

LONDON - Investors battered European stocks, dumped the bonds of Spain and Italy, and bid the euro down against the dollar Monday after the collapse of weekend coalition talks in Greece edged that country closer to an exit from the euro zone.

The sweeping market action dealt a blow to hopes that the damage of a Greek exit, should it occur, could be comfortably contained.


In the market carnage, Greek stocks fell to two-decade lows, and Spanish bond yields leapt to levels not seen since the panic of last November. Shares of a big Spanish lender dropped 8.9% on the Madrid bourse, pulling the benchmark index down 2.7%. The Italian market also fell 2.7%, and the euro slid to $1.2845 late Monday in London, its lowest level in four months.


The worry and the carnage are both running deep. And they should. Everything is now interlinked to such a degree that there is no possible way for a run on Greek banks or continued declines in the value of sovereign debt to be anything other than exceptionally destructive.

Everybody owes everybody, and there’s not enough productive economy to mask the insolvency of the system any longer.

We saw this as Spain’s sovereign yields vaulted, Spanish bank shares plunged, a not-so-happy linkage courtesy of the LTRO funding which enabled (and encouraged) Spanish banks to load up on Spanish debt. A virtuous circle morphed into a vicious spiral, each element weakening the other all the way down.

That the US stock market is only down less than 5% from recent highs is a testament to the power of the liquidity that the Fed and US banking system have directed at keeping things elevated. However, this cannot last, at least not without another big quantitative-easing (QE) injection from the Fed. Without such an infusion, I am calling for another 2008-2009-style market rout of at least -30% but possibly as much as -50%.

QE, stat!

The reason we need another QE injection is that the same dynamic of debt destruction is again stalking the markets. As expected, the Fed has been waiting for a clear signal that it is time for more thin-air money, and again they are going to wait too long to prevent more damage from occurring.

This time I am expecting a coordinated central bank action that will involve most or all of the major central banks of the OECD: Japan, UK, US, and Europe.

One day, we will wake up to find some global message about the need for a coordinated response to a major crisis, and each of the central banks will be issuing some massive new amount of thin-air money. Of course the programs will be called something fancy that will require shortening to an acronym and will involve buying some form of debt (sovereign debt, but maybe also bank debt), and we’ll track this via central-bank balance-sheet expansion.

Perhaps we’ll see this line go up a little steeper, or perhaps the same trajectory will be maintained a little longer:

Regardless, more printing is on the way, because the alternative is the utter collapse of the entire Western banking system. And quite probably a few governments, too.

To me, that is an unthinkable outcome, and one that I have every faith will be avoided at any every cost. It is the main reason that I am quite content to hold onto all of my gold at this juncture. Anybody selling physical gold here is either broke (and needs the money) or is just not paying attention.

To drive the point home, consider this picture posted on Zerohedge taken from a German television production purported taken of the Ministry of Finance in Athens. A picture is worth a thousand words:


By the time the Ministry of Finance is storing records in garbage bags and shopping carts, perhaps, just maybe, one might become a little concerned about loaning money to the Greek government. One hopes.

If You Think Greece is Bad

Greece, of course, is tiny compared to Spain or Italy. The situation in Spain -- which is big enough to matter -- is truly dire, very large, and getting worse.

Spain has been playing fast and loose with the numbers, and that fact has now been revealed to the world. It’s not a pretty picture.

Spain Underplaying Bank Losses Faces Ireland Fate

May 10, 2012

Spain is underestimating potential losses by its banks, ignoring the cost of souring residential mortgages, as it seeks to avoid an international rescue like the one Ireland needed to shore up its financial system.


The government has asked lenders to increase provisions for bad debt by 54 billion euros ($70 billion) to 166 billion euros. That’s enough to cover losses of about 50 percent on loans to property developers and construction firms, according to the Bank of Spain. There wouldn’t be anything left for defaults on more than 1.4 trillion euros of home loans and corporate debt.


Taking those into account, banks would need to increase provisions by as much as five times what the government says, or 270 billion euros, according to estimates by the Centre for European Policy Studies, a Brussels-based research group. Plugging that hole would increase Spain’s public debt by almost 50 percent or force it to seek a bailout, following in the footsteps of Ireland, Greece and Portugal.


“How can you only talk about one type of real estate lending when more and more loans are going bad everywhere in the economy?” said Patrick Lee, a London-based analyst covering Spanish banks for Royal Bank of Canada. “Ireland managed to turn its situation around after recognizing losses much more aggressively and thus needed a bailout. I don’t see how Spain can do it without outside support.


And this is just the losses that Spanish banks face on their real-estate portfolios. They are also now facing losses on all the Spanish sovereign debt that they bought with their LTRO funding as well. Very simply, Spain now needs a massive rescue, and soon.

Meanwhile German citizens are all done with helping their southern neighbors. Merkel has used up all of her political capital on the rescues performed to date, and it is far from clear that any more help is politically doable here. The only way that I can see such help coming is under some terms other than drawing upon the savings of Germany’s citizens. Printing, perhaps, but even that is a dicey political proposition here.

If Spain drops here, then you can just set an egg timer for when Italy will go. And then France. The dominoes will rapidly fall from there.

Why I Am Nervous These Days

In describing JPMorgan’s recent $2 billion (or is it $20 billion…or more?) trading losses and Jamie Dimon’s (the CEO of JPM) awkward explanation of how certain hedging operations went wrong, the author of this next piece asks the obvious question:

Does Jamie Dimon Even Know What Hedging Risk Is?

But wait a minute? If you’re hedging risk then the bets you make will be cancelled against your existing balance sheet. In other words, if your hedges turn out to be worthless then your initial portfolio should have gained, and if your initial portfolio falls, then your hedges will activate, limiting your losses. That is how hedging risk works. If the loss on your hedges is not being cancelled-out by gains in your initial portfolio then by definition you are not hedging risk. You are speculating.


We still don’t know the exact dimensions of JPM’s losses here (my expectation is that more bad news will follow soon enough), but we can be sure that the big banks have not learned from the mistakes of the past and are still engaged in risky practices involving derivatives.

Whatever JPM was up to (and I am still not entirely clear on what that was), it was not classic hedging, which serves to minimize losses, but something far more speculative.

The reason this gives me such cause for concern is that it once again exposes a small portion of the derivative monster that will certainly be awakened when the European situation goes into full meltdown over the Greek, then Spanish, the Portuguese, then Italian situations.

While derivatives are, in theory, a zero-sum game, and therefore could, in theory, be forgiven and forgotten in a pinch, the reality is that they’ve been used to pretend that risk did not exist and therefore losses don’t exist.

The ugly truth here is that we are at the tail end of a most unfortunate credit bubble -- four decades of global excess by the OECD countries -- and there are massive losses to account for. Just as the offsetting counterparties involved in the subprime CDO and CDS mortgage crisis did not zero out because the losses they were allegedly papering over were all too real, the same will prove true of the derivative paper allegedly covering sovereign and corporate debts.

Remember, the biggest holder of derivatives is the company that just demonstrated that it doesn’t really understand the concept of hedging.


Overall derivatives, especially interest-rate-linked derivatives, have increased by over $100 trillion since the crisis began. As JPM just evidenced, and as hinted at by the interminable hand-wringing over allowing Greece’s paltry $78 billion in credit-default swaps to be triggered, real dangers lurk here.

I wish I could analyze the situation better than the rest of the crowd that either screams catastrophe looms or coos that everything is safe, but I cannot. The situation is too opaque, too convoluted, and too complex to tease apart. I simply don’t know what the true nature of the risk really is -- and the truth is, nobody really does. You might as well ask these analysts to tell you the exact size and shape of the first ten waves that will hit Laguna Beach exactly one year from now beginning at 12:05 p.m.

Instead, what I can offer to you is the idea that instead of reducing (let alone eliminating) risk, all that derivatives have done is mask risk. This means that whatever losses are resident in a system with four decades of debt-fueled malinvestment and overconsumption are still there just waiting to be realized.

It is this certainty that the losses remain, the risk is masked, and the bets have only grown larger that makes me very nervous these days as I contemplate the possible implications and repercussions of a Greek exit from the euro.

To Sum Up Part I

Given this environment of massive, rapidly-accelerating, and obfuscated risks, the prudent among us are undoubtedly wondering, How the heck is this going to play out? And how do I prepare for it?

In Part II: What To Do When the Central Banks Blink, I lay out my forecast for how low asset prices will sink before the central banks once again attempt to ride to the rescue with gargantuan liquidity measures.

But this next time won't work as it did in 2008, in my estimation. I see central banks being near the end of their ability to influence developments at this point. More liquidity will affect different asset classes differently, and for the first time raise real (and valid) concerns about the widescale debasement we are witnessing across the world's major fiat currencies.

Putting your capital into those resources best positioned to appreciate most as the result of money printing and hold or increase their purchasing power in such an environment should be a top priority for every concerned investor.

Click here to access Part II (free executive summary; paid enrollment required for full access).

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RacerX's picture

I think the Technical term is: "Stack underflow"

Definition of: stack underflow 

An error condition that occurs when an item is called for from the stack, but the stack is empty. Contrast with stack overflow. See stack.

I think I need to buy a gun's picture

endgame bitchez,,,,,happy farming

AldousHuxley's picture

greeks are not driving prices down.

It is end of Fed's operation twist + Chinese tighetening monetary policy.

Chinese are the biggest buyers of commodities.

Greeks are irrelevant side show. It is like some bum in the street corner declaring bankruptcy. Meanwhile the rich guy in cushy neighborhood is trying to sell all his 10 mansions at once.


Look at China and Brazil's economy.

markmotive's picture

Soon enough we'll see a massive rush of liquidity coming out of China.

AldousHuxley's picture

That's why Bernanke will give some excuse on unemployment and announnce QE3 in their next meeting June 19-20.


QE3 will last into November past Obama's election and it should break QE2 highs.


US will pick up global demand, create more jobs, win-win for the American elites. Meanwhile they are hoping that euro falls apart so Old World Order no longer poses challenge against New World Order.

boogerbently's picture

Greek default isn't bad.

It's the morons that bought Greek debt (leveraged) for the high %, thinking EU would NEVER let it fail. LOL

EXACTLY what went wrong in '07-08.

10X, 50X, 100X  LEVERAGED irresponsibility. (with our $$$/pensions/401's)

My pension "guarantee", promises $900/mo for the $3700/mo I'm getting now !

(Now, where are THEY going to get THEIR $$$.......don't you think it's.......INVESTED ???)

AldousHuxley's picture

largest holders of greek debt are the germans and the french who are the only ones actually controlling ECB and EU.

Basically Germany paid off her WWII debts off and is trying to become a superpower again, but couldn't enslave the greeks, portugese, and spanish to be productive as US did with manufacturing in Mexico and China.


Something with the warm mediterranean weather not making people want to spend 12 hour days inside a manufacturing plant.


rothschilds angry with is Old World Jew vs. New World Jew competition. meanwhile Chinese and Russians are wishing they kill each other.




economics9698's picture

All you brilliant economists need to know is this shit will hit the fan in 3 to 5 years.  It’s been 3 years and 7 months.  The shit will hit the fan, we do not know exactly when but it will hit the fan.

When it does there will be no more bail outs.  It will suck.  If we are lucky Romney will let the shit fall into a hole and we can rebuild.  If we are really lucky the authorities will not fight the reinstitution of gold and silver as reserves.

There is a good chance we will be five or more countries in ten years. 

And that is all the shit you need to know my fellow economists.  Stock up on food, ammo, guns, rifles, first aid, and the usual shit hit the fan crap.


Almost Solvent's picture

The breakup of the union is the most logical thing. The Northeast and Left Coast have no interest in the Deep South or The Plains. 


And vice-versa.

Campagnolo's picture

the shit hit the fan in Detroit already, after the crash of 2008 and GM& Chrysler went into bankruptcy....Detroit is a ghost twon now: Grass is two feet long by now, you can dump any garbage you want on the streets, piles of garbage and concrete-bricks shit, burned and stolen cars everywhere, abandoned yachts, I mean it's terrible, seriously. But the negro is happy, you know, they never knew about booms or crashes, after all they all are on section 8 and coupons barbecuing and drinking Lokos every day.

AldousHuxley's picture

shit that hit the fan was so big that it broke the fan.....and that was in the 1980s.



AldousHuxley's picture

elites don't even try to hide it anymore.

Let S&P500 settle back down to SMA 200 under 1280 which is 0% gain YTD, then pump out more cash and finish the year with 10% gain for 401k holders.


lifting the market during november is important for 2 reasons:

1) election time

2) set the mood for christmas shopping.

Future Jim's picture

Doesn't that depend on whether they want Obama or Romney? They could make another October surprise like in 2008.

AldousHuxley's picture

"they" ?


it is a deal between Obama and  Bernanke. Bernanke wants to keep his job so that he can help his pre-med son pay off $400k in med school debt, he better print on command.


when bernanke prints, obama = romney, as wall st. will profit and look good and get year end bonuses as if they predicted some shit.


but wall st. worker bees will be laid off before election time anyway so they'd voting obama for extended unemployment benefits.

Chump's picture

The only thing you should really rely on is that you don't know anything.  The shit is hitting the fan.  The events that QEx, TARP, TALF, POMO, LTRO, etc., so on and so forth were supposed to help avoid/mitigate are happening as we speak.  Do you believe the banking system can withstand the losses from Greece exiting the Euro?  This isn't some piker event like AIG, and Greece is a piker compared the behemoths next in line.  That's why this is so key, because I believe the saying goes, "he who panics first panics best," or some such variation.

US can only fill in for global demand if we have a manufactoring sector.  Oops.  And global demand only exists if other countries can continue deficit spending.  Double oops.

But of course I'm cognizant of my own fair warning: I don't really know anything.  But I do believe that our respite is over.  I say this as someone who needs much more time to prepare.

SheepDog-One's picture

Right. People think they got it ALL figured out 'QEef for happy-time ObaMao, and shopping'...bunch of BS theyre never going to do what everyone has been trained to believe they will do. Theyll do the opposite.

Chump's picture

Yeah this whole "election year DOW can't tank" thinking bewilders me also.  2000?  2008?

We'll see I guess.  I hope I'm wrong and we get another year on the backs of some other acronym programs or meetings or PR releases or whatever.

maxcody's picture

Bull!  The Greeks are dead.  It is all but happened.  The EU are Chins's trading partners and Greece is a zero.  Zeor - Zero is Zero.  They already died.  If we lost a few milliom dead beats we would be better off also.  I like greek food - it will be cheap.  They destroyed themselves.  It is what would happen to the US if Obama won the elction which he will not. 


maxcody's picture

Bull!  The Greeks are dead.  It is all but happened.  The EU are Chins's trading partners and Greece is a zero.  Zeor - Zero is Zero.  They already died.  If we lost a few milliom dead beats we would be better off also.  I like greek food - it will be cheap.  They destroyed themselves.  It is what would happen to the US if Obama won the elction which he will not. 


Marginal Call's picture

You just had to go and press the button that said "full retard", didn't you?

Treason Season's picture

Always thought it was a little strange Bush 1 never objected to Kohl and Mitterand's Euro project. Tin foil stuff but did someone know then it would implode?

Seer's picture

"Greeks are irrelevant side show. It is like some bum in the street corner declaring bankruptcy."

I believe that Martenson is saying the same, but that the "bum" has his leg out and will end up tripping all the others rushing to work, sending them careening on to the rail tracks- trains stop and no work...

I've been saying for years that China will really torch things off.  Much of my initial investigation into why was based on my observations of the Canadian economy, and the influence of the Chinese in Canada's wealthiest provinces (B.C.).  The signs are visible if one removes all glasses.  Easier to see is the linkage to/with Australia. Take away: Canada and Australia are going to start lighting up; China, with it's greater ability to stomp dissent, will be able to hold the flames down for a while (but when they break they'll rage to such a degree that you'll be able to see them all the way around the globe!).

AldousHuxley's picture

I see you are talking about San Francisco bums...

resurger's picture

ok guys, i need that fucking red chair for Max Ficher


GoldRulesPaperDrools's picture

`You will refer to me as "My Lord"`; now bring me my wine, wench!`

optimator's picture

Remember, "A loaf of bread, a jug of wine, and thou",

Will get you fat, drunk,..........and in a whole lot of trouble!

Wakanda's picture

Got my swiss chard seeds into the dirt today.  Almost time to plant zukes.

Ookspay's picture

Raised beds are in: Tomatoes, cukes, zukes, Cauli, brocc, carrots, cantaloupe, bush beans, Bell peppers, jalapeno's and herbs. My asparagus has been giving me a fistfull every other day since March. Raspberries are coming back nicely as usual. Cracking corn and snow peas as we speak! 

I just stocked my pond with a new Talapia breed, to augment the Large Mouth, Blue Gill and Cat population...

Thinkin' of getting a nat-gas storage tank for my generator, JIC...

Bring it BITCHEZ! We'll be fine.

Umh's picture

So far; tomatoes, cilantro, basil, onions, carrots, celery, peas, tomatillos, artichokes and parsley root. I'm still taking in the parsnips and garlic from last fall.

Ookspay's picture

Sounds good! Artichokes? Gotta look into that. I like Cilantro for my mango guacomole, but it can take over the garden!


Wakanda's picture

Raven and Jackpot hybrid Zucchini from FEDCO Seeds in Waterville, ME.

Stand back!  They will explode with fruit in July.

Ookspay's picture

Yum! Zucchini, sliced thin. grilled with EVOO and fresh dill.

Wakanda's picture


Extra Virgin Olive Oil.  Googled it...


Ookspay's picture

Your welcome, I think we are "soil mates!"  (uugghhh)

AC_Doctor's picture

I put SC in a Vitamix blender with collard greens, frozen strawberries and some protein powder.  Holy bat shitter,  my intestines could not be happier.  Good growing to you...

azusgm's picture

Already put up 2 packages of green beans and a container of pinto beans. Cooking with the fresh onions, beets, etc. Usually eat the green peas straight from the vine while I'm standing in the garden. New potatoes are sitting in a bucket on the patio. First melon vines are starting to run. The first honeydew is the size of an egg.

Oh how I do love to watch my garden grow.

SilverDoctors's picture

Everyone thinks gold and silver are selling off in a repeat of 2008, but as Eric Sprott stated last week, Gold falling hard in the midst of European collapse and contagion, as well as JPM's derivatives crisis is COUNTER INTUITIVE. 

While we'd love to see silver back at $8 and gold sub $700 and rent a U-haul to fill it up, PHYSICAL gold and particularly silver are being removed from the market in size.

Our suppliers for SD Bullion have been raising prices on nearly everything intra-day throughout the week, and we can report first hand that absolutely massive amounts of physical metals are being taken off the market into this price weakness.

Personally, it looks like The Morgue is attempting to extricate itself from its last 13,000 silver shorts as Ted Butler believes, and they are preparing to go long ahead of QE3 which will likely be massive.  After 5 years of using every trick in the book to prevent a deflationary collapse, there is no way The Bernank will stop now.  QE Will continue to INFINITY to prevent The Greater Depression.

Saucy-Jack's picture

I think the paper price of gold and silver will be hammered, but there will be no physical for sale at those prices. We might get $700 gold and $15 silver on the futures exchanges, but nowhere will anyone be able to buy them for anywhere near that price.

cranky-old-geezer's picture



Careful there, many believe that's how certain MF Global accounts got tagged for liquidation in the "oops, we don't know where it went" bankruptcy, those standing for delivery.

With flight to the dollar knocking down gold and sliver (and all other commodities), it's gonna become irresistable for some big player (or big players working together) to place huge long futures contracts (against JPM's naked shorts) and stand for delivery, fully intending to bust Comex and send spot prices skyrocketing.

And they'll be big enough players nobody will dare try to Corzinize them.  Who knows, they might even have nuclear arsenals.

ffart's picture

People running into cash and bonds to escape a currency crisis seems a lot like cattle running into a slaughterhouse to escape the thunderstorm. 

AldousHuxley's picture

problem is people think thunderstorms are some act of god and sign that god is angry, so they'd rather face the slaughterhouse than some angry god.


Fear and greed are two powerful emotional (not rational) motivators banksters use to create opportunities for themselves (buying opportunities prior to bernanke's QE3 gift next month)

Likstane's picture

Who do you think causes thunderstorms?  

The fear of the LORD is the beginning of knowledge; Fools despise wisdom and instruction.  Prov.1:7  People who run into the slaughterhouse are just getting to the same place a little quicker.  Better to lie down and beg God for mercy. 

Huxley-just another man worshipping drug addict

in4mayshun's picture

My info supports what "SIlver Docs" is saying. I hear that very wealthy Asians are strategically emptying out gold vaults bank by bank as the gold cartel no longer has adequate physical metal to play musical chairs with. Sooner or later the music stops and someone is left without a chair, er, bullion. The larger banks are forcing the smaller ones to give up their gold. Obviously this can only continue for so long before a TBTF has to cough up the physical and it must buy it on the open market or go bankrupt. From my source, there were many contracts set to execute at $1,610...

Stay tuned, could get interesting.