Europe is rapidly approaching the "tipping point." If the banks were to liquidate their loans to the debt-ridden countries at a loss, then they would have to realize those losses on their balance sheets. Holding on to the loans allows these criminal operations to value them far above the market. On the other hand, selling the loans would destroy the banks' equity, and many, if not most, of the biggest and worst would cross over into insolvency.
With the exception of Germany, who experienced the horrendous 1923 inflation in the Weimar Republic, all of the other countries in the European Union want the European Central Bank to bail out the banks. The ECB is Europe's Federal Reserve. Is this story beginning to sound familiar? Remember, they say they're considering bailing out the countries, but it is the banks they will be saving.
If Germany, the one big powerhouse in Europe prevails, then it may very well fall to our Federal Reserve to bail out the European banks. Since, in my opinion, they can't very well let Europe disintegrate, as that would take the global financial system with it. Someone, probably both the ECB and the Federal Reserve, are going to have to print, print, print. And since you can't eliminate debt by incurring more debt, governments and central banks will try to inflate their way out of it. Once they do that, people will finally "get it" and quickly lose confidence in paper currencies. Hard assets will reassert themselves.
And waiting in the wings are an estimated $1.5 quadrillion in totally opaque over-the-counter-derivatives, 97% of which are held by the five biggest banks in the USA. The element, hydrogen, is inert when compared to these weapons of mass destruction. This is not a time to be brave with your assets.
November 17, 2011
Monday, November 21, 2011
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