We now have something of a capital freeze occurring in the US at the very same time that the primary pillar of EU stability (Germany) will very likely begin to pull back from providing additional aid (case in point, Greece is still waiting on receiving proposed aid from six months ago).
The markets are holding up on hopes of additional stimulus from the Central Banks. Some bulls are even calling for QE 4 at the upcoming Fed meeting, despite the fact that QE 3 was launched a mere three months ago and was open-ended (meaning it would not end until the Fed deemed it time).
The market continues to track the same pattern it performed going into the failed debt ceiling talks of July 2011. As you’ll recall, then as is the case now, US politicians failed to reach a credible solution to the US’s debt problems. What followed was a credit rating downgrade and a market collapse.
I’m going to lay out everything you need to know about the fiscal cliff negotiations. After reading this, you can ignore all of the media’s coverage of this topic as well as various politicians’ announcements pertaining to this subject.
During the its first term, the Obama Administration thus far has proven itself in favor of increased Government control and Central Planning. That is, the general trend throughout the last four years has been towards greater nationalization of industries (first finance, then automakers and now healthcare and insurance), as well as greater reliance on our Central Bank to maintain our finances.
Things are so bad that the ECB has put the entire Spanish banking system on life support to the tune of over €400 billion Euros. To put this number into perspective, the entire equity base for every bank in Spain is only a little over €100 billion.
Germany now has a formal working group assessing the cost of a Grexit. Even large US-based multinationals are implementing contingency plans for a Grexit. The list includes JP Morgan, Bank of America Merrill Lynch, Visa, PricewaterhoursCoopers, Boston Consulting Group, Juniper Networks, and others.
All analysis of the EU boils down to one idea: will Germany foot the bill? The truth? Germany cannot and will not. Never in history has a country accomplished what the EU bulls claim Germany will do.
If you want further evidence that the financial elites are already preparing for a default from Spain and a collateral crunch, you should consider that the large clearing houses (ICE, CEM and LCH which oversee the trading of the $700+ trillion derivatives market) have ALL begun accepting Gold as collateral.
Everything that has happened since 2007, every Central Bank move, ever major political decision regarding the big banks, every trend, have all been focused solely on one issue.
Countless pages have been written about why Lehman caused the system to almost implode. However, the reality is that Lehman nearly took down the entire financial system for two reasons... and Spain will be far far worse.
