July 11, 2011.
After Greece’s government surrendered to banker occupation, trends analyst Gerald Celente told Russia Today that:
America’s “economy continues to decline. There’s no recovery in sight.”
Across Europe in Greece, Britain and elsewhere, people are reacting against forced austerity to assure bankers get paid.
In fact, Trends Journal months ago called it:
“Off with their heads 2.0….The global ponzi scheme is under collapse….whether it’s in Egypt, Tunisia, whether it’s in the UK, Greece. Watch out for Spain. Here comes Italy. Ireland’s coming up the backstretch. It’s only going to get much worse.”
“The people know the score….What killed capitalism (is explained) in four simple words: too big to fail…The banks are failing, and they want the people to bail them out….I want to make this clear.
The IMF is nothing more than the International Mafia Federation, the loan sharks of last resort, and the people know it. They call it privatization. Adults call it stealing valuable public assets, and selling them to your friends really cheaply.”
In all these countries:
“The politicians only represent the people who give them the most amount of money….And what do these austerity measures bring – a lot more poverty and unemployment.”
People know it. They’re mad, and they’re reacting globally.
Expect it eventually in America, the heart of predatory capitalism, stealing from the many for the privileged few, bankers and war profiteers always first in line for handouts, as much as they want whenever they want it.
On July 2, long-time former insider, market analyst/observer Bob Chapman said world markets, especially America’s:
“Are in a state of uneasiness, and it’s only a matter of time before they degenerate further. The real question is will everything break loose between now and the end of the year?”
In part, it will, and it’s currently happening.
In fact, as Chapman explained months ago:
“problems are coming together like a bad dream. This could be a replay of 2008, but for a different set of reasons.”
Wall Street is a reliable leading indicator.
On June 16, New York Times writer Susanne Craig headlined, “Wall Street Braces for New Layoffs as Profits Wane,” saying:
“Wall Street plans to get smaller this summer.” Faced with economic weakness, “many of the biggest firms are preparing for deep cuts in jobs and other costs.”
According to Normura analyst Glenn Schorr:
“It’s a tense environment right now,” suggesting hard times perhaps returning soon.
According to Chapman, Greece’s problems weren’t solved. They’re festering greater than ever. More on that below. Moreover, sovereign nation debt ratings:
“Are falling like ten-pins. (We believe that) euro, (Eurozone) and European Union problems….are unsolvable.”
“Little has been done to repair” the 2008 debt crisis. Conditions across Europe, Britain and America are no better. Sooner or later Greece will default, perhaps causing “a collapse of the world financial system, as we know it….The entire financial sectors” in Western countries “are more vulnerable now than ever” and getting worse.
Watch out. Failure somewhere could trigger panic globally. Moreover, China’s economy is slowing. Major inflation and real estate bubble problems exacerbate it, and Japan’s now back in recession.
Overall, talk of recovery is illusion,
not fact,
in the face of growing global deterioration.
Financial expert and investor safety advocate Martin Weiss has been warning regularly about deepening debt crises and likely defaults. On July 4, his latest report is headlined, “Why the Great Greek Tragedy Has Barely Begun,” saying:
“The likelihood of Greek debt default is much higher than ever, what Western governments and media won’t explain until its debt bubble implosion no longer can be hidden.”
Have bailouts helped? Absolutely not! In fact, global institutional investors believe:
“The probability of a Greek default is FOUR times greater today than (when) European officials announced” their bailout.
Moreover, when Lehman Bros. failed in September 2008:
“The most investors were willing to pay for $10 million in Greek debt default coverage was $52,000. Today, they’re paying 45 times more!”
In fact, they know that force fed austerity, including tax hikes, layoffs, spending cuts, lower government revenues, and public asset fire sales won’t avoid default. It’s not if, just when and how badly contagion spreads globally.
What Greece and other troubled economies, entrapped by IMF mandates, have done is sign their “own death warrant.” Greece’s loans will keep it going another few months at most, “through the summer, but not a single second longer,” so it’s back for more help, more cuts, higher unemployment, less revenue, greater poverty on the road to financial oblivion like other countries on the same path.
As a result, Weiss sees three major financial crises ahead:
(1) Already reeling from America’s greatest housing depression, US banks face more crushing burdens ahead because of their exposure to European banks that have loaned billions to Greece. When they’re hit, US banks go with them, those most exposed hammered hardest.
(2) Vulnerable US money funds have “half of their $1.6 trillion in assets in European banks.” Moreover, “50 million Americans have money in those funds!” When Greece defaults, they’ll be hard-pressed to repay what they borrowed. As a result, “breaking the buck” may follow, meaning their share price value will fall below $1, what most investors once thought impossible, but it happened after Lehman collapsed.
In late June, even Bernanke admitted that European bank exposure “pose(s) some concern to money market mutual funds,” a rare divergence from past rosy scenario predictions.
However, danger signs extend well beyond money funds. Virtually all global debt markets are vulnerable, including corporate commercial paper and US Treasuries. When crisis conditions deepen globally, no financial assets are safe. As a result, catastrophic consequences are possible.
(3) “Washington is suffering from the same debt disease as Athens,” multiplied many times over. As a result, every hardship Greece now faces offers “a sneak preview of what could be in store (for America), barring” an unlikely major political miracle as lawmakers debate exacerbating measures, not healing ones. No wonder Weiss advises, “Above all, stay safe!”
In Part 2 of his May Quarterly Letter to investors, GMO asset management firm co-founder and chief strategist Jeremy Grantham headlined, “Time to be Serious” by lightening up on risk exposure at a time stocks are 40% overvalued and fixed income “badly overpriced.”
With red flags emerging everywhere, now’s “not the time to float along with the Fed, but to fight it,” meaning safety is essential over risk as beating odds gets longer in a global economy getting sicker, not better, but don’t expect Western governments or media to explain.
WHY THE GREAT GREEK TRAGEDY
HAS BARELY BEGUN
By Dr. Martin D. Weiss
Nor can you believe Wall Street Pollyannas looking for any excuse to push the U.S. stock market higher.
The only reliable measure of this debt crisis is the price thousands of institutional investors pay ~ and are willing to continue paying ~ for actual insurance contracts to protect themselves against future defaults. The more probable the default, the more they’ll pay.
And for the country that’s at the epicenter of this crisis ~ Greece ~here’s what this measure is telling you, loudly and unambiguously:
Despite the biggest sovereign bailout in history and despite all the happy talk last week about a new infusion of emergency cash, the probability of a Greek debt default is now the highest ever!
Have the bailouts made any difference? None whatsoever!
In fact, based on how much they’re currently willing to pay for the insurance, institutional investors around the world have concluded that the probability of a Greek debt default is FOUR times greater today than it was when European officials announced their giant bailout package.
That’s right. Nearly 14 months ago ~ on May 12, 2010 to be exact ~ when the European Union (EU) and International Monetary Fund (IMF) announced a 110 billion euro bailout for Greece, the cost of insuring $10 million in bonds against a Greek default was close to $540,000. Last week, it was $2.3 million, or 4.3 times more!
Think that’s shocking? Then consider this:
Even when Lehman Brothers failed and even when the likelihood of a global collapse was at an all-time peak, the most investors were willing to pay for $10 million in Greek debt default coverage was only $52,000. Today, they’re paying 45 times more!
In other words, the world’s largest investors now believe that the probability of a Greek default is FORTY-FIVE times greater today than it was at the height of the 2008 financial crisis.
Why are so many knowledgeable global investors who establish the price of these insurance policies so pessimistic, even while world leaders and markets are celebrating the “salvation” of the Greek economy?
Because THEY KNOW that the Draconian austerity package just passed last week by the Greek parliament ~ higher taxes on entrepreneurs and the poor, spending cuts for seniors and others, and the fire sale of government assets ~ won’t do a darn thing to help Greece avoid a default on its debts.
They FULLY UNDERSTAND that these measures will actually hurt the country’s chances for survival in the near term.
They KNOW that each time you raise taxes and cut spending, the economy takes a hits, government revenues go down, and the country finds it even closer to impossible to pay its bills and debts coming due.
Let’s say, for example, that you own a manufacturing company that has fallen on hard times. You can’t make your monthly payments. So you start downsizing ~ laying off workers and selling off equipment to raise the cash. The trouble is that your debts outstanding don’t shrink by one iota. So unless you can find some new way to generate more revenues, the more you downsize, the more likely a default will be.
You are, in fact, signing your own death warrant. That’s exactly what Greece is doing now. Worse, it’s piling on still more debt that merely buys a few weeks more time:
The much-ballyhooed loans Greece just qualified for will only help it survive for two to three months ~ through the summer, but not a single second longer.
ALL THIS LEAVES YOU WITH TWO ~ AND ONLY TWO ~ CHOICES …
You can believe the same politicians who have consistently and deliberately deceived you about this debt crisis from day one (see also “Government Lying about Debt Crisis“).
Or you can believe the global investors who have no agenda but to protect their own investments from the true risks.
It also leaves you only two courses of action:
The choice should be obvious: Despite what they may be saying in Athens, Berlin, Washington or on Wall Street … no matter what the media may try to sell you … the handwriting is on the wall: Greece is in the final stages of an historic collapse. Nothing can stop it now.Believe the politicians, forget about the crisis and go back to the old days of buy-and-hold investing.
Or, believe the reality of the marketplace and continue to err on the side of caution.
Not concerned? Think it’s a far-away event that won’t affect you? Then consider this …
THE UNFOLDING GREAT GREEK TRAGEDY IMPACTS YOUR FINANCES
IN THREE MAJOR WAYS …
If this were just an isolated financial crisis on the other side of the world, it probably wouldn’t amount to much as far as most Americans are concerned.
But in today’s shrinking, hyper-connected world, the consequences of a Greek default could not be more important to you, me and every other U.S. investor.
In fact, I count no fewer than three major impacts this crisis will have on your wealth and well-being:
IMPACT #1:
It will crush U.S. banks. It’s no secret the real estate crisis is back ~ falling home prices, a tsunami of home foreclosures and more. And despite short-term rallies, it’s virtually impossible to envision a scenario in which bank earnings are not adversely impacted.
This is why bank stocks took such a big hit in May and June. Wells Fargo, for example, was flying high near $34 per share. Then, without warning, it suddenly plunged 24% ~ to $26.
Bank of America hit $15 per share and then plunged more than 30% ~ all the way down to $11 per share. And nearly every major bank ~ JPMorgan Chase, Regions Financial, and others ~ show the same pattern.
But here’s something that not everybody knows:
Those same U.S. banks have loaned huge amounts of money to European banks.
And because those European banks have, in turn, loaned billions to Greece, they will be among the first casualties of a Greek default.
IMPACT #2:
U.S. money market funds: Did you know that U.S. money funds have invested half of their $1.6 trillion in assets in European banks?
It’s true: And 50 million Americans have money in those funds!
That’s not good news. When Greece defaults on its loans, many European banks will find it impossible to repay what they borrowed from U.S. money market funds.
That could force many to “break the buck” ~ allow their shares to fall in value below $1 each. Even the worry that it could happen can cause the financial markets to freeze and send investors stampeding to withdrawal money.
Impossible? Absolutely not! That’s exactly what happened after the collapse of Lehman Brothers in 2008. One fund that owned Lehman debt, the Reserve Primary Fund suffered mass withdrawals, which, in turn, caused a run on many other funds.
Last week, even the eternally oblivious Fed chief Ben Bernanke fretted publicly about the stability of U.S. money funds:
“They do have substantial exposure to European banks in the so-called core countries: Germany, France, etc.,” he said. “So to the extent that there is indirect impact on the core European banks, that does pose some concern to money market mutual funds.”
Many investors aren’t waiting. In the last two weeks, they have withdrawn $45.6 billion from prime money market funds, according to data from the Investment Company Institute.
But the risk goes beyond just money market funds. After the Lehman panic in 2008, virtually the entire global market for short-term debts ~ especially corporate IOUs called commercial paper ~ froze up.
Without the Federal Reserve stepping in to make massive, blanket guarantees, thousands of companies could not have borrowed ~ even to roll over debts coming due ~ no matter how good their credit rating. We would have seen a chaotic chain reaction of defaults.
This is the kind of SYSTEMIC risk that caused Washington to throw $700 billion in TARP funds at the problem last time around. But this time, with Congress vowing never to do such a thing again, there is no safety net.
The consequences could be catastrophic.
IMPACT #3:
Washington is suffering from the same debt disease as Athens. Yes, in Greece, the illness is more advanced. But including government agencies like Fannie Mae and Freddie Mac, the U.S. government, like Greece, has passed the critical danger threshold of more money tied up in debts than the entire economy produces in each year! (A debt/GDP ratio of over 100%.)
Indeed, nearly everything you’re seeing in Greece right now:
The huge cutbacks in government spending on seniors …
The substantial tax increases ~ not just on “the rich,” but on every portion of the population …
The soaring interest rates and unemployment …
Even the protests and riots …
Are little more ~ and little LESS ~ than a sneak preview of what could be in store for us right here in the States, barring a major miracle in Washington.
SO HOW DO YOU KEEP YOUR
MONEY SAFE AT A TIME LIKE THIS?
MONEY SAFE AT A TIME LIKE THIS?
First, the obvious:
Do not believe the authorities. Distrust what you hear from Washington or Wall Street. Follow the facts and nothing but the facts.
Second:
Do not count on government guarantees to always protect you from losses. Ultimately, as governments seek to protect their own finances, they will pull back from their role as lender, investor and guarantor of last resort.
Ultimately, if a major bank like JPMorgan Chase or Bank of America cannot meet its obligations, it could be on its own, and investors or even depositors may have to pay a steep price.
Third:
Make sure your bank or insurance company has the financial wherewithal to fulfill its promises independently ~ without government handouts or guarantees. That’s what our Weiss Financial Strength ratings do for you. For a free Weiss Rating on your institution, go to www.weisswatchdog.com.
Sign up. Or if you’re already registered, simply sign in.
Search for your institution. (Use strictly the FIRST word of its name.)
Add it to your watchlist and then check your watchlist for our rating.
Fourth:
Continue to monitor the rating as this crisis unfolds. Hard to do? Not at all! Once you’ve added your institution to your Weiss Watchdog watchlist, we will automatically notify you whenever the Weiss Rating has changed, giving you the new rating along with specific instructions on what to do next.
Fifth:
Reduce the risk in your investment portfolio. While you’re at www.weisswatchdog.com, check the investment ratings of your stocks. Especially if they are D+ or lower, they are likely to be among the most vulnerable.
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