I could have titled this piece “The Inevitable” or “It’s not a matter of if, but when” but I have another thought in mind and want to look at Greece from another angle. Yes, either of those two titles would have sufficed because a Greek default is inevitable and only a matter of when.
My thoughts this morning are “how long will it take” to drag everything down with their default? As mentioned yesterday, the ratings services, creditors and even “official” sectors are furiously trying to figure out how to not call a default a “default”. This is of utmost importance because what is left of our global “rule of law” will destroy the derivatives markets from the inside out. This needs little explanation because it is black and white, “grey” however is what the power structure is desperately hoping for.
If Greece is considered to have defaulted, rather than having some “splaining to do”, there will be billions worth of “paying to do”. Greece has 350 billion euros of debt owed, this amount is surely “covered” by CDS (credit default swaps). The reality is probably 10 times this amount but let’s assume it is only this 350 billion. Liquidity has and is drying up ALL OVER THE WORLD, a 350 billion euro hit will bankrupt many entities, not to mention those who actually hedged and …don’t get paid. You see, there are two sides here, the debt itself and at least an equal amount of CDS …so now we are talking an absolute minimum of 700 billion euros.
And remember, banks all throughout Europe (including the ECB itself) hold Greek bonds at par (100 cents on the dollar) because Greek debt, even though everyone knows its not worth the paper it is printed on is mandated as tier one capital. “Tier One” meaning the “safest stuff” and worthy of bank portfolios “carefully safeguarding” depositor funds. I hope you see the humor in this, sub-sub prime student loans are probably now safer than Greek debt.
Now to the title itself, how long will it take? For what? For a total meltdown, THAT’S WHAT! Will we see some sort of slow burn where convulsions show up now and then, or the other extreme, a complete meltdown? In my opinion we may see both for a couple of weeks or maybe even two months. It is possible that those rendered insolvent get overnight injections and don’t admit to anything. This may work for a short time but as always, insiders will know and start slipping out the back door.
Honestly, once a default is “recognized”, and trust me it will be sooner or later, I don’t believe the markets will stay open more than 48 hours before being closed by necessity. I cannot imagine any scenario where Greece defaults (doesn’t pay) and the markets do not convulse into a death spiral in more than two week’s time. There is a reason for me going through this exercise, some may believe they will be able to move and sidestep it. Others have been trying to time the “perfect” entry or re-entry into precious metals and believe they will be delivered upon, I don’t believe this will practically be possible.
Forget about the “timing”, I do believe there will be some who time it perfectly …but just one problem. So you are so smart and deft to sell out of the stock market at one minute before midnight, where does your capital go? It takes three days to even “settle” a trade, then, does your broker send a check? A wire? Or do they put the settled funds into their “insured” money market? Do you see the problem? Your capital may be out of stocks (maybe not a great idea if we enter hyperinflation) …BUT it is STILL WITHIN THE SYSTEM! Looking at the precious metal timer, let’s assume they are also “perfect” in their timing. They get their order in and their broker confirms it, will there be time to transfer good funds? Will the metal actually arrive in their hands? Maybe?
Here is the problem as I see it, “emotions”. When a Greek default is announced, stocks will probably fall and physical metals rise. How many have the fortitude to sell into a weak stock market …and not sit tight “hoping” it comes back just one more time. How many will be willing to “pay up” for gold in what is believed to be an ongoing bear market? And if the markets are open again the next day, these emotions are even more fierce to fight!
The point to this missive is just as simple as the answer to the title “How long will it take?”. I cannot stress how important it is to be positioned where you want to be NOW! Not next week or when your gut tells you to because no one knows the timing for sure and Greece is only one of potentially 100 or more flash points that can push the system into the same heap of disaster. How long will it take? Not much or not enough? Either of these answers can and will affect your entire future.
As someone wisely said – I would rather be One Year Early, then One Minute Late!
The implications of what you posted are:
*If your cash is still within the electronic banking system – how will you get it out?
*When the breakdown occurs, and the banks declare a bank holiday – Will your Credit & Debit Cards still work? Will the ATM machines still dispense cash?
*WHEN will the banks (or the FDIC or the government) declare a BAIL-IN?
*WHAT will everyone use – AS MONEY – to buy goods and services … When the banking system is down?
*HOW will goods move from the Producer to the Retail Store, where consumers can get to it?
correct.
And the final question – How long will it take?
**For Chaos to ensue, in the streets, when people are looking for food and good, old fashioned, looting!
not long.
Bill
If a black cop kills a white kid, I am looting bass pro shop.
that would make as much sense as ……………………..
smth I learn today…
we take something from the natural world (given freely to us) that we can live in happily
and layer upon it artificial systems (and invent something like law, taxes, price etc – all artificial concepts force into the natural life rhythm)
and destroy all that is in it around it and well… everything pertaining life
of which ironically none has give birth to himself and give himself life
but there is a price and cost to pay when one enters this artificial world of systems.
and this is suppose to be “technology superiority”
and “advancement of human race”
note to self, what on me and around me is not artificially made by the artificial systems? is this life? is this why i came to earth this time?
sad… and all has been force to play along…. and that is has become the only “reality”
how long? how low? hello?
How very true!
People will find out that all that superiority and technologies and “knowledge” is fake and distraction. Nature is our ancient and only shelter.
Even gold would not have any value.
btw thats frm Tao te Ching Chp 38…
you can find the translated version shld you fell like it (and there many others just as there are many others versions of “truth” and “reality”)
Most know not where they come from and most dont know where to go.
Now what? What now?
Ponder this below thro your wkends perhaps… may you find your answers…
Chapter 38 in its original chinese wordings in its original ancient chinese cultural days…
上德不德，是以有德；下德不失德，是以无德。上德无为而无以为；下德无为而有以为。上仁为之而无以为；上义为之而有以为。上礼为之而莫之应，则攘臂而扔之。故失道而后德，失德而后仁，失仁而后义，失义而后礼。夫礼者，忠信之薄，而乱之首。前识者，道之华，而愚之始。是以大丈夫居其厚，不居其薄；居其实，不居其华。故去彼取此。
have fun…
Hi,
Thanks. There is huge and interesting life beyond that “conventional” truth, very, very, very few know about.
Mr. Holter:
I eagerly await your missives every day; you have a good, no nonsense manner of communication.
Here is the conundrum:
Another analyst whom I highly regard has postulated that numerous defaults have already taken place and that there is an enormous amount of damage control and jawboning going on behind the scenes, in order to try and mitigate a full-on panic. My point is simply this: there is a distinct difference between a “default” and an “admitted default.” What is your confidence level that the great unwashed will actually be informed that a default has occurred? Said differently: are you sure there is no way this “tectonic implosion” can’t in some manner be hidden, as is nearly every other nefarious, ill-conceived, moronic mental machination of our banking criminals?
Thanks and have a great day.
Matt
I agree, defaults have already taken place AND have been hidden. They cannot hide them all.
ALL DEBT WILL BE PAID.
Either by the debtor or by the creditor. Either with dollars worth pennies, or with pennies worth dollars. It will be paid.
This is a foundational law of economics and has been for ever.
As you say Bill, just a matter of timing and who gets what!
thanks OLI.
Hello Mr Holter,
Without your analysis and a host of others all my retirement funds would have been in a Money Market Fund and let’s just say I am beyond retirement age at 71.
Worse MSM would have been my source of information for financial & political information
THANK YOU!
you’re very welcome William.
Surely if we get a hyperinflationary collapse and the metals go to the moon, TPTB will simply repeal any tax exemptions on metal legal tender, and then levy windfall taxes on the disposal of bullion.
So your 500 ounces of silver might be worth $1 million overnight, and you might be able to turn it into fiat and pay off your mortgage, but your mortgage company will DAMN SURE tell your government what you just did, and a CGT bill for 90% of your gains will land on your mat a month later, bankrupting and imprisoning your ass and causing your house to be confiscated by the State.
How to avoid all that and “get out of Dodge” with a lasting benefit will be the trick, surely?
not bad if you have 500 ounces and “net” $100,000. That’s $200 per ounce you are paying a fixed debt down with.
How long? The longer, the better AND worse. Better, because stackers can get more insurance, worse, because the fall, splatter and blood in the streets, turmoil and overhang will be greater with each passing day of IT not happening. I am currently happy sitting on a nice stack I feel comfortable with, and stack a bit less metal right now (still stacking though) but hoard some extra fiat cash out of the system. I think we might see a devastating low coming for the metals, THE low, and then the paper markets break and PMs could be revalued over night or a over banking holiday… So I stack some extra funny paper money, and should the previous lows be breached, will stack at a double pace… it it does not materialize and trade higher from here… fine as well… The money masters have put up a “good” fight. Hat tip to our adversaries, but as you say, it is when and not if… If when is even 5 or ten years out, I do not care, but I doubt they have enough metal to keep the game going for much lower… We will see it unfold as we stack along. Thanks to you Bill, and all the rest of the MF team.
good plan.
Love reading your articles, you break this whole scenario from hell down quite well! Was wondering, in your opinion would it be a wise decision to not only have gold and silver, but perhaps say trade in some Dollars for Yuan (since it will become backed by gold hopefully soon) and also maybe buy into some chinese stock? Wouldn’t the Yuan very soon become like a certificate for gold since it will be backed by it? Thanks, and keep up the great articles.
yuan would still be a “derivative” of gold, even if backed by it.
Just to play devil’s advocate – What if the ECB gives Greece another bailout (assuming they also get the remaining 7.2B from the previous bailout)? I know that there is greater reluctance to drop money into a black hole, but there is also the opposing force of wanting to “kick the can down the road”. If there is one thing I have learned from these financial crises is that politicians are the same no matter which country or region you live. How willing at this moment is Germany to risk the collapse of the euro project or be labeled as the culprit for a global meltdown?
it will only increase the amount of debt they cannot, nor will pay back. It would buy a small amount of time.
It matters not.
For now my stacking self may be looked upon as a doom and gloom fool.That I can live with for now.
But within I feel that I have at least taken steps to soften the blow that is coming.
What terrifies me is the thought of how destructive man can be when man is caught in a position of desperation.
It does not take a scientist to realize that life as we know it is about to change drastically.
I read recently that every night 8 million people go to bed hungry.
What will happen to our lives when 80 million people or more go to bed hungry every night.
The old and frail dependent on social programs will soon perish and the strong and unethical will over run what is left of the middle class.
(If you show any evidence of assets the desperate will target you.)Act accordingly.
Who knows soon country gardens may become a desired asset and target of thieves.
If you are watching the situation you likely realize that the level of lies that is being told to us by our leaders as they prepare to extend their ability to pretend is beyond belief.
This lie will unwind and likely soon.
In closing the mental fragility of man is not going to help us when the SHTF.
Thank God for the MF team and others that speak the truth.
The truth seems to have been a fleeting thing these last few decades.
thanks Mike.
As a Bullion dealer, I take exception to the comment that if you pay for bullion during a panic, you may still not be able to receive it. The only failure will be in the banking system, where my ACH to my distributor does not go through assuming I have received a wire of good funds from the customer. One reason we only accept wire payments and not checks or credit cards. Transfer of good funds to distributor ready to ship product is completed in 3 business days and could be only 2 days. It will be the banking system that freezes up, not the bullion dealers and distributors who most of which have excellent records over many decades. DWY, WCM
sorry David, I stick to what I wrote. If the banking system goes down, will that not affect “distribution” of EVERYTHING because everything runs on credit? And doesn’t everything include things like gasoline to run trucks to make deliveries? You may be right and the economy is still running but missing on a few cylinders 3 days after a banking closure. You may also be wrong. The “excellent track records” (during “normal” times) you speak of will mean nothing during a banking closure, if you believe it will be business as usual you are dreaming. WLH MF
Hasn’t the USA already defaulted on its debt by not having a budget limit?
BTW gold has gone up in $AUD 200% in the last 10 years.
Does that make Aussies wealthier if they bought 10 years ago?
Most would say yes.
I say no.
But you still have gold !!!!
My only concern is what will the world look like when I feel it’s time to unload PM’s .
it will be ugly and you will fear selling your PM’s.
Hi Bill:
I think you have already anxwered my question but let me present this. I have nearly all my working capital invested in miners and went in in 2010. They went up for a while but from 2011-2014, they had lost literally 70% of their value. They have come back some, about 40%. So I am still down from 2010 about 30% now. I really REALLY am waiting for a fast rally and plan to sell them, but do realize that a PM rally means a collapse is shortly behind it.
So my question is to anyone here, should I sell at at 30% loss to get out now, pay off my mortgagae, buy more physical or should I wait for the huge spike and get out them at even a profit and hope it settles in time?
I believe there will be a huge markup, even if you want out at breakeven this may not be possible. They may move in virtually overnight fashion in multiples of what are now “forcing” a profit on you.
Sure, that last statement from B Holter is incomprehensible!
Here: “I believe there will be a huge markup, even if you want out at breakeven this may not be possible. They may move in virtually overnight fashion in multiples of what are now “forcing” a profit on you.”
so Bill lets get down….
“incomprehensible”? meaning you don’t understand it?