Connecting the dots:
- We don’t know exactly what is to come, but we can all join the very few dots from where we are now, to the collapse of the first major bank…
- With very limited room for government bailouts, we can very easily join the next dots from the first bank closure to the collapse of the whole European banking system, and then to the bankruptcy of the governments themselves.
- There are almost no brakes in the system to stop this, and almost no one realises the seriousness of the situation.
- From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude.
- And then do you think Japan and China would not be next?
- And then do you think the US would survive unscathed?
- That is the end of the fractional reserve banking system and of fiat money.It is the big RESET.
- Bonds will be stuck at 1% in the US, Germany, UK and Japan (for this phase).
- The whole bond market will be dead.
- Short selling on bonds - banned
- Short selling stocks – banned
- CDS – banned
- Short futures – banned
- Put options – bannedWe have around 6 months left of trading in Western markets to protect ourselves or make enough money to offset future losses.After that…we put on our tin helmets and hide until the new system emerges
The European Central Bank stepped up pressure on Thursday for a joint fund to guarantee bank deposits in the euro zone, saying Europe needed new tools to fight bank runs as the bloc’s debt crisis drives investors to flee risk.
The European Commission’s top economic official, Olli Rehn, warned the single currency area could disintegrate without stronger crisis-fighting measures and tough fiscal discipline.“There are now growing doubts among international investors about governments’ cohesion in guiding the reform of European governance and even their ability to ensure the survival of the single currency,” Visco told the Bank of Italy’s annual meeting.
Here we go again. Back in July 2011 we wrote an article entitled "The Real Banking Crisis" where we discussed the increasing instability of the Eurozone banks suffering from depositor bank runs. Since that time (and two LTRO infusions and numerous bailouts later), Eurozone banks, as represented by the Euro Stoxx Banks Index, have fallen more than 50% from their July 2011 levels and are now in the midst of yet another breakdown led by the abysmal situation currently unfolding in Greece and Spain.Nothing is really being solved here, and everyone knows it. We're essentially in the same place we were when the crisis erupted back in 2010, only now there's more total debt outstanding. Bank of Canada Governor Mark Carney remarked in a December 2011 speech that "the global Minsky moment has arrived", and it's now plain for all to see.16 The "Minsky moment" refers to the work of Hyman Minsky, a deceased American economist who developed theories on how debt accumulation eventually leads to financial crises.You don't have to be an economist to understand the crux of Minsky's theories. As an economy grows it takes on increasing amounts of debt. The point eventually comes when the cost of servicing that debt can no longer be met by that economy's productive capacity - that's the Minsky Moment, and we're watching it play out all over the world today.Where this will get tense, however, is when the market acknowledges the Minsky moment in a larger EU economy, like Spain or Italy.
Spain and Italy last night seemed to be moving closer to the danger zone where a bailout by the European Union and the International Monetary Fund becomes unavoidable.The markets' nerves were shredded against a backdrop of increasing discord among European politicians and policymakers over how to handle the single currency's spiralling economic and financial crisis.Spain is forecast by the OECD think tank to contact by 1.6 per cent this year. Italy's economy is seen contracting by 1.7 per cent in 2012. Unemployment levels in Spain have hit 25 per cent. In Italy the rate is 9.8 per cent. This prompted the Italian Prime Minister, Mario Monti, to warn yesterday of a potential social "backlash" against the cuts being forced through in the teeth of recession.
“The global financial situation is really starting to spin out of control, Eric. It won't be long now before the Federal Reserve, ECB, Bank of Japan and Bank of England start more QE in an attempt to keep global stock markets from imploding and causing another Lehman Brothers collapse.”Both banks and governments are too highly leveraged. Monetary history clearly demonstrates that too much debt is a recipe for disaster. We saw one disaster in September 2008 when Lehman collapsed, and it looks like another disaster is coming soon. This one promises to be even worse because few, if any, of the underlying problems have been solved over the past four years.We are in the early stages of a fear event.
FHA loans, those insured by the federal government, saw a huge spike in foreclosure starts, up 73 percent during the month, according to the LPS report. Loans originated in 2008 and 2009 are primarily to blame, although all FHA vintages did see some, albeit far smaller, increases.Still the numbers mean a big hit to the FHA, which is already operating at well below its congressionally mandated two percent capital reserve ratio. “The 2008 vintage alone represents some $14 billion of unpaid balances in foreclosure, and the overall FHA foreclosure inventory continues to rise,” adds Blecher.
The head of the European Central Bank hit out at the political paralysis gripping the region as he warned the eurozone's set-up was "unsustainable".Amid escalating talk of a potential bail-out for Spain, the president of the ECB said the central bank was powerless to stop the debt tornado. "It's not our duty, it's not in our mandate" to "fill the vacuum left by the lack of action by national governments on the fiscal front," he said.Luis de Guindos, Spain’s Economy Minister, urged Berlin to “assume its part” in restoring the health of the eurozone. He said: “The battle of the euro is being fought right now in Spain and Italy. The future of the euro is at stake in the next weeks.”
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