If it has not become clear that the European sovereign debt crisis is a mire reflection of what happened to the States and their big banks in 2008 then let’s take a closer look.
Bear Sterns should not have been saved, arguably the only bank that should have been was Lehman Brothers. As we know, by the time Lehman raised their hand there was no funding left.
The problem we are now faced with is that Greece is just the first European nation needing to be bailed out. That’s just the beginning from an international stand point. The sovereign debt crisis is not limited to Greece, the PIGS (Portugal, Italy, Greece, Spain) and Europe, it is worldwide and a very global crisis. What happens when the U.S. needs bailing out within the next 2-5 years? The not so funny part is how the U.S. agreed to pay billions to the IMF (International Monetary Fund) to support this mess. Think about that, a county that is $100 trillion dollars in debt with a annual deficit of $1 trillion, who just past the largest health care bill of all times also felt they should help fund the IMF with over $100 billion so other reckless spending nations could get some relief. Regardless whether you agree with their feelings or not, where are they getting the money to do this… THIN AIR! It’s not debatable, it’s that crazy. The fiat monetary system was the stupidest creation of mankind and we are in the early stages of watching it change modern day civilisation for those that are unprepared. Take a look at the civil unrest that is starting to take place in Greece from the cut backs to the social programs.
The real problem is not bailing out these countries; it’s that these nations are in so much debt and need so much financial restructuring they can’t be bailed out long term. Trying is only making things worse. Since the people in power did not learn that throwing money at the banks didn’t work it’s no wonder they are acting the same way with our leading nations. For you history buffs you will notice we are repeating the exact same mistakes that led to the great depression. Its sucks but rock bottom will be felt before a real recovery takes place. A rock bottom that is not manipulated with freshly printed fake money.
Yesterdays and today’s market decent resulted from the fact that even after Greece was backed with over $100 billion dollars over the weekend it only took a couple of days for investors to realise that the tax payer funded money coming from the IMF would only prevent Greece from insolvency for about a year. This caused interest rates to do a whip saw from 14% last week to under 10% Monday, back up to 14% Tuesday. Their bonds really are that risky; they’re junk and should be treated accordingly.
Because markets are dumb this is why we have seen the bear market rally that started March ’09 last as long as it has. However, when it starts to fall apart and I feel its close we will likely see the market indices dip below their lows from the crash. The DOW for example could see 5000. Silver and gold will continue to increase but will have a bumpy ride as the USD will continue to show strength and be bought as a leading currency until the issues facing the US really start to take center stage after the devastation in Europe is well underway.
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