Greece, Ireland, Portugal, Spain, what is wrong

The Euro is a way for the 'richer' countries to extract value from the poorer countries.
It isn't a normal fiat currency.

Nigel Farage gives a nice speech to describe the situation that has been created.

Global Currency Shakedown, Round 4 about to begin

Back in 2006, with my help of friend John, realized that the US economic structure was based on financial fraud through mortgage securitization.
Bill Clinton signed into law the routing of the glass-stegall act, put into place to separate 'gambling' from bank deposits.  George W routed the FBI department staffing down to a couple of people to investigate the trillion dollar mortgage industry.  In the late years of George W administration the final bubble was being blown, resulting in 2008-2009 financial crash.

In August 2008 I started this blog as an outlet on my rantings to everyone I could meet on the pending economic impact.  Little did I know how close it was.

In the turmoil of then, the natural outcome would have been a deflationary collapse that was stopped by a couple of drastic measures.  First, the government went on a no-holds barred deficit spending campaign to soften the blow to the economy.  Second, mark to market accounting in place since the Great Depression to valuate companies was suspended, as it is to this day.

Some purists would say both of these acts where not appropriate and that capitalist forces should have played out naturally.  I am not one of those people.  Yes, that is an option, and maybe it was the best one that should have been followed.   But I can see why dramatic steps was taken to prevent a global economic collapse, as it was perceived at the time.

What I am against is all of the drastic steps WITHOUT meaningful reform.  That is, 'fixing' of what was broke.  We have chosen to take the worst path, appeasement without follow through on reform.

The market has hit an all time high today.  Did you hear the bell?  My friend John has said there is no bell that goes off warning everyone that the market has hit a multi-year high followed by a market collapse.  Basically, there is no warning.

I am NOT predicting a market collapse per-say.  I am predicting that we are into phase 4 of this mutli-year global economic refactoring.

Phase 1 was the incredible loose regulation and promotion of securitization of trillions of dollars providing the market collapse in 2008-2009.  There are many other factors at work, such as derivatives in the 100's of trillions, but safe to say all the games in phase 1, lead to phase 2, 2008-2009 collapse.

This lead to phase 3, appeasement into 2013.  I realized that appeasement was the route and not cleaning house in 2010, and changed my stance that the market may not collapse per-say, simply be dwarfed by lack of law and raw financial meddling.

We are soon to enter phase 4, appeasement failing.  There is no amount of appeasement that can fix the system, without taking strong steps to fix the heart of the problems.

We have India's Rupee under duress, with India taking draconian steps to curb gold imports.  Mish is calling for a possible Rupee collapse as food inflation hits 18% per year!
We have various countries in Europe, such as Italy, Spain, Greece simply upping the ante on financial gains, buying weeks, months, maybe years, but not decades as they exhaust every  'new legal' option.
We have countries like France, promoting job creation without even bothering to talk to the companies involved in so-called creation plans.  And for what? a few double digit jobs?  That is worth lying about?
Japan is leading the world on the demographic catastrophe that awaits us all in an economic system that at its core foundation is based on ever increasing demand.

We have China continuing to try to transform it's economy into a consumer-global based powerhouse to replace the USA.  In the process, the information about the Chinese economy is safely in the unreliable fantasy zone.  China has HUGE potential, but who can understand their true standings?  At best, it is a hail mary hope that may come to save the world?

Back in march 2011, once I realized the world would NOT fix any core issues, but simply appease, the timeline for 'disaster' shifted from short term (2010-2012) to longer term (2013-2017).

Well, we are here, sad to say.  I don't expect fireworks until 2014, but it could happen next week.
The world dances around the US dollar, and that dance is starting to show it's age.  All is needed is enough people to lose faith in the dance to start the next phase of the crisis, global currency shakedown.

Best I can say is diversify, with a chunk in cash ready to move.  The USD I CANNOT envision any sudden moves down in value for YEARS to come, so it is once again the safest play....until its not! :)

Europe poised to blow in 2013

Granted, I have stated YEARS ago that Europe was going down the tubes.  And yes, I was year(s) too early.  As I have watched over the years Germany and the European union contort, twist, manipulate, and do everything under the sun to maintain the Euro status quote, I keep wondering, is it time yet?

I am amazed at how really stupid the European Union is behaving towards Greece, Spain, and other countries.    The European Union had entry criteria for each country to maintain a certain fiscal responsibility inorder to ensure the Euro wasn't undermined by some countries using the clout of the Euro to get a free ride.

Here we are years later, and its known that many countries used off-balance sheet tactics to hide massive debt, to play games with their balance sheets to appear more compliant than they where.

Once the derivative insurance schemes blew sky-high with cost, the jig was up.  No longer could these countries afford to pay the premium to ensure the risk, to offset their at risk balance sheets.

The right thing to do for their citizens was one of two things.  Either get the Euro onto a path of fiat currency, allowing countries to run debts not tied to a central authority OR to exit the Euro and return to a soveriegn currency.

Neither of those things happened, instead these countries have sold everything that wasn't nailed down, and cut services to the public to reduce spending.  At the same time, jacked up taxes to new highs in hopes of balancing their budgets.  Recently Greece initiated a 'savings tax', basically taking a % of all savings in banks, under certain criteria.

The result?  Business plummeting, unemployment syrocketing, budgets blowing wider, not narrower.  And like a crack addict trying to get his life together just by taking 'one more hit', it just gets worse.

Greece is entering into full implosion mode.  The society is devolving into a barter society, with credit collapsing.  Food stocks are low, estimated two days in super markets.   Bank losses are going parabolic, and cash shortages due to the credit collapse.

The Greek government due to lack of strength to choose what is right for the people, has set themselves up for a violent revolution.  Something that I didn't even think was possible 2 years ago.  Never did I think the leaders would outright ignore the public and drive into private interests, bankrupting a nation.  I knew that was the path they where on, but I thought this game of chicken would have ended a couple of years ago.

Next up is Spain, then Italy, then the rest of the weaker European countries.  If Greece falls into revolution, we will have a Euro Spring, with a contagion that cannot be contained.  If Germany doesn't relinquish its tight demands for fiscal responsibility, deflationary collapse is going to occur.   Once started, it may actually take France down with it.  I do think Germany will not fall, but will go under some severe stress as it tried to hold the line.

I really do hope I wake up tomorrow to hear Euro come to their senses.  Forcing countries down a deflationary collapse and under economic strain to jack up taxes, slash services is not sane.

I do agree that all of that needs to happen - but under local rule.  In this situation its a foreign entity - European Union, forcing fiscal responsibility.  This will force the common Greek to enter a mind set of nationalization, us vs them.  A more prudent path would have been Greece to have its own currency and due to its lack of fiscal constraint their own currency devaluation forcing Greece to reform. 

I really hope that this collapse does not occur, that the nations can see fit to change the construct.  The irony is if Germany holds the line, the Euro should shoot up like a rocket in a deflationary collapse with the dollar plummeting.   As the European nations go under immense strain, the rising euro should give it a one-two punch accelerating the chaos.  I am mildy optimistic that the US fares reasonably well, as the currency war favors the dollar in the near term.  Take a look at the chart at the end of this post.  Pretty amazing eh? Its nice to be the big boy on the block.

Gold should do well, but may get a punch down as asset fire sales occur to raise capital.

I could be wrong on all of this, but its starting to look pretty dicey to me.  I went from looking at this situation that the policy makers would see the problems and realize that the path was destruction.  Now its obvious that there is only one way to change course - by force.

European Crisis ahead

I am continually amazed at how incredibly irresponsible people are at their jobs and responsibilities.  The European situation was obvious to me and many other bloggers years ago that they where sitting on a pile of lies.  A pile that makes the USA lies look not that bad.

And here we are, day after day, month after month of the European political drama of denial and patchwork promises to stabilize the union.   What have Europeans gotten for all this effort? Their (and US) tax dollars thrown at bankrupt countries, banks, and other financial institution with NOTHING done to address the root cause, excessive debt, lack of transparency, and mark to fantasy accounting.

Greece's bond rates I have published before soared.  Now its spreading to Italy, Spain, Portugal, Ireland, Belgium and even France!

The leader for being the next Greece fiasco is Portugal, with soon to follow Ireland, Spain, or Italy.
Once one of these countries become the next Greece, I predict we won't have a 3rd, but a 3rd, 4th, 5th, and 6th at the same time.

Prediction: Europe is incapable of doing the right thing, as America has proven it isn't either.  So we must have a European crisis.  And Germany WILL buckle and print the euro just like America.

Next its a coin toss on who goes down next, China, US, or a long list of other countries.
But for those who think the US is untouchable, your just like most Europeans 1 year ago.

Once those countries buckles, then its time for the global currency crisis.  I still think 2013-2018.  It takes quite a while for this to play out.

Greece, Spain, Portugal, Italy, Ireland

Greece, Spain, Portugal, Italy, Ireland are at risk of outright failure, unless Germany backs all their debt.  Time will tell.  Some nice video debate.  Nigel Farage is my European Parliament hero.

SNL skit on Europe woes

I found this skit pretty funny, covering problems of Ireland, Greece, Spain, Portugal, and the IMF chief caught trying to rape a cleaning girl at the hotel.

Last Saturday had Justin Timberlake, who I find very funny on SNL, couple of skits I liked can be found here and here.

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