Now that we know Greece will default, where do things go from here? Before getting to that very tough question (with no concrete answers), I would ask another stinging question. "Was a Greek default really "already in the market"? I have to chuckle just a little as Zerohedge did an article quoting many "talking heads" who as of last Friday were still doing their best Bruce Willis imitations and advising "come out to the coast, we'll have a BLAST"! How Could The "Greek Experts" Be So Wrong? As I questioned last week, a Greek default and Eurozone exit was in no way already factored into the market ...unless you believe today's carnage is a result of Puerto Rico 'fessing up to their bankruptcy!
Where exactly does this go from here? First and foremost, Greece is on par with Lehman Bros. of 2008 or may even be worse! For a sovereign government to go down, or I should say "be allowed" to go down is worse than Lehman. Lehman Bros. was "forced down" and put out of business before anyone figured out what the actual ramifications were. Now, everyone knows of the interconnected ramifications yet Greece was still "allowed" to default (yes I know, whether it is classified truly as a default remains to be seen?). My point is this, if the central banks were truly omnipotent, then how could "a Greece" ever happen? For those of you who believed it would be "papered over" as everything else up until now has ...something has changed!
But what exactly has changed? Greece, or Detroit, or Puerto Rico or wherever, are all small but they are REPRESENTATIVE of what is wrong with the entire system. In fact, if you truly break the numbers down I believe you will find the U.S. is actually in a deeper hole than Greece. Before you scream at me, please include all of the guarantees and future U.S. obligations, if you do this you will see Greece is actually a fiscal tightwad!
Beginning immediately it is important to understand any institution can seem healthy one day yet announce insolvency the following day. This is NO JOKE and I am not grandstanding. We just do not know who owns or is obligated to "what". The financial markets and the individual players are so levered in various directions, volatility as we are now seeing can easily bankrupt the underfunded overnight. I believe this has already happened over the last few years but clandestine funding has kept it hidden. The recent volatility may have been too sharp, sudden or violent to keep the evil genie in the bottle, we will soon see.
I cannot stress how important it is now for you to be on guard for anything at any time. A market closure, though likely over a weekend can occur during ANY WEEKDAY! Do not allow yourself to be lulled to sleep by any rallies from here or stories of how "the storm has passed". It is ONLY BEGINNING! Greece is absolutely nothing compared to what is to come. Even the Chinese market has entered bear market (-20%+) from just a month ago and the leverage in that market is huge with an unwinding due. Ultimately however, this will end up taking out most all of the major money center banks worldwide. To see London, Frankfurt, Washington D.C. and even Basel Switzerland buckle under the coming CDS/derivatives meltdown will not be a shock to me. As this progresses, it may take weeks or months to unfold but be aware 48 hours is truly all that's needed.
The only thing I can tell you with certainty is this; as the meltdown proceeds I can guarantee physical gold and silver will still be standing. My thought is they will be standing "much taller" than they are today as they truly are "money" and global "monies" are going to come under scrutiny. This is at the core question to be answered of it all ..."what is money"? The current belief is that "debt is money", it is not and never was. Debt may have been perceived as money or even an asset ...it has and always will be a liability! THIS IS THE KEY LESSON MANKIND IS ABOUT TO LEARN!
Standing watch for you,
Bill Holter for;
Bill Holter writes and is partnered with Jim Sinclair at the newly formed Holter/Sinclair collaboration.
Prior, he wrote for Miles Franklin from 2012-15. Bill worked as a retail stockbroker for 23 years, including 12 as a branch manager at A.G. Edwards. He left Wall Street in late 2006 to avoid potential liabilities related to management of paper assets. In retirement he and his family moved to Costa Rica where he lived until 2011 when he moved back to the United States. Bill was a well-known contributor to the Gold Anti-Trust Action Committee (GATA) commentaries from 2007-present.
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