The latest news out of Greece is truly a head scratcher. After agreeing with the Eurozone to a four month extension, the new plan to get from here to there can only be described as insane. In order to roll over current debt, Greece plans to borrow from public pensions!
They had a T-bill auction yesterday which was supported by funds from their public retirement fund, the method employed was comical. What Greece has decided to do is to pledge securities into the “repo” market to raise cash, this cash is then used to bid at auction …the new funds then are used to pay down past debt. Do you see how this works? As a graduate of the venerable University of MCV (University of My Cousin Vinny), I will try to explain it to you on street level terms.
While business is good, you live a little better than what your income would provide. You do this with confidence because each year has been at least as good if not better than the year before, so living a little large and adding debt to your balance sheet is not a great concern. Then you start living even further beyond your means. As time passes, the leader of the local gangs asks you if your gang would like to join? Of course you want be part of this well known and prestigious group of gangs but one of the preconditions is your business must be good. It doesn’t matter what your businesses are, what does matter is you can make money and not be a drag on the other gangs. Knowing that you already owe some out of town loan sharks what do you do?
First off you hire Golden Suks to help you with some creative accounting and enter into a few contracts with them so you have something to show when you open the books for your entry audit. “Sure we owe Clive down the street but Guido owes us and will pay Clive directly if his interest rate starts to rise, so it’s all good!”. This is where it gets interesting, you are accepted in as one of the gangs but business begins to slow and even your crew starts holding back on you. Normally you get a 25% “tribute” on anything they steal or conjure up, but now, even on deals you find out about you aren’t getting what you used to. This is a problem, a BIG one!
You see, while living above your means you had to keep borrowing more from your loan shark. He never really pushed you and was willing to let you just pay interest because you had always paid on time. This begins to change as business slows, now your source of cash became less willing to lend. What do you do? Simple, you decide to go to other loan sharks and take on more loans because as the saying goes, “you only live once and you might as well have fun doing it”. This of course is akin to normal people paying off one credit card with another but it’s OK as long as you can keep borrowing more.
Along the way another problem arose, you had to for appearance sake give a monthly stipend to the families of deceased “soldier’s”. You did this out of cash flow and even gave some of them cars and houses. You don’t want to kick out the spouses and children of those who had provided for you so you go to the local pawn shop with deeds and titles. The pawn shop gives you some cash and the families still get to use the cars and houses, problem solved!
Then the problems really begin, the other bosses just so happened to have a meeting at a resort where three or four of your loan sharks were vacationing. Your name came up and each one found out you were in debt to ALL of them. You tried to divert attention but it turned out this news got back to the other bosses, your whole charade then came down. As news normally does, it spread like wildfire. Everybody knew you were broke which lead to other consequences. Even your own gang was rebelling and the tribute money dried up to a trickle. It was a good run but now it’s over.
Enough parody, what Greece is doing now by borrowing against unencumbered (though probably worthless) pension treasury securities is ridiculous. If this is their plan, the people will riot further, run their banks until they all close and destroy the country. They are pledging pension assets to raise cash …and are using this cash to bid for their own bonds. They must issue new bonds in order to pay for maturing old bonds! What will happen when they need to actually make the repo payment in order to get the pension assets back? Where will this money come from? And when they can’t come up with the money, even their retirement plan becomes unfunded. I do want to make another obvious point, what good will Greek treasuries be to the new holders who lent money against them to begin with? What could possibly go wrong?
As I have said many times before, “broke is broke” and cannot be solved with more liquidity which will ultimately need to be paid back. This is the broad systemic problem, liquidity cannot (never could) fix a solvency problem. More liquidity only creates more debt and only buys some time while making the overall problem larger and larger. At some point in time, the money either gets paid back or “bankruptcy” is admitted.
Before finishing I would like to make one other point. Greece is no different than the EU itself, the U.S., the IMF, Britain or any other Western fiat Ponzi. The only difference is that Greece got “caught” first and did not have the ability to print their own money. While “printing” has allowed the fraud(s) to be covered up and smoothed over, sooner or later the debt must be paid back…and this is the game. The debt cannot be paid back and never was expected to really be paid back, rolling debt over and over and over was the plan. The funniest thing to me is all of this supposedly is “already in the market”. In other words, all of this is “priced in”! At a time where “risk” of all sorts has never been higher, there is virtually zero premium for any risk. In the simplest of terms, we live in a world gone mad!
No one looked to the end game because it was so much fun while playing the game. I have no idea what the “event” will be but please remember this, huge forest fires all begin with one thing in common, a very small spark or something to ignite it. They all start small and all grow out of control. This, is the collective global monetary system we live with and why so many nations are preparing to exit the game.
Wow Bill.
Another amazingly clear and concise piece.
Had a long and heated conversation with family and friends last night on the potential for a major financial calamity and the result was the following.
So what…maybe you are right but there is nothing you can do about it. Just enjoy the time and do not concern yourself about something you can do nothing about.
One more piece of advice I was given. Do not believe what you read on the internet. Those rich guys that are expressing warnings are just expressing an opinion and nothing says that their opinion is valid.
Major case of DENIAL present around me.
Frustrating and SAD.
Well when the shit hits the fan at least I can say to myself I tried as hard as I could to get them to pay attention.
my 26 year old step daughter is visiting and I had the same conversation with her last night. As it turns out, I am the “idiot” and everything is fine!
They will never recognize anything before the stocks and bond bubble pop.
Things are geting weirder and weirder on a daily basis :
http://www.zerohedge.com/news/2015-03-05/great-bund-short-slaughter
The more I watch this all unfold it is becoming really clear that the “reset” will be overnight and it will include a debt jubilee. TPTB will price AU/AG at levels that will cover all the personal, business and sovereign debt in the world. The average Joe in the street will think he’s won the jackpot because his credit cards, line of credit, car loan and mortgage outstanding amounts have all been wiped out. He won’t care or even notice that AU/AG are at stratospheric numbers.
I’m not so sure about the jubilee part.
The inflection point has been achieved. The speed at which “black swan” events are occurring is becoming faster.
The Ukraine has banned gold transactions over $125, currency derivatives and inter bank purchases exceeding $10,000 The Turkish lira is down again having lost 30% just this year! The US factory order stats have tanked for the sixth month in a row. Bond yields and the price of crude head for the basement, as the ECB announces their first massive QE. The US jobless claims have had the worst start to a year since 2009. China just announced slower growth expected this year.
The above Bill, is just this morning and thats just scratching the surface! The smoldering fire has burst into flame and has now reached the tinder dry underbrush, heading for the trees!
they tried to control too many moving parts at once.
fool, half-wit; imbecile; dolt, dunce, numskull.
Bill after looking up some dictionary meanings of the word idiot I found the above descriptive words.
I am a fool for trying to open their eyes. A half wit because I am believing what I read on the internet, and a numskull for worrying about something that only a dunce would worry about.
I am a dunce in the corner with a foil hat.lol
the funny thing is, many of the “conspiracy theories” have now been proven as fact …but we are still idiots.
In the west losers = idiots so if you were not with the winners (stocks and bonds) you are a loser and so whatever you can say is just stupid.
Sad but true…
The debt jubilee seems unlikely to me
The world is having currency wars, wars in Middle East, Santions against Russia, NATO creep against Russia in Ukraine, Secession/ war in Ukraine etc etc etc.
World war to cover up USA and Western nations debt/ derivatives dominoes / major bank failures seems far more likely than debt jubilee.
Best hope is that China or Russia announce their GOLD holdings and the world sees the USA as naked hopefully avoiding all out world war. Even this will be painful for those in the USA where civil war will break out.
Sorry
Bill,
Probably the best term to discribe people that are not interested in reality is “Darwinism”. I’m afraid in addition to the current Hyper Monetary Inflation crash staring us in the face, this century of declining resources will be the end of globalism. The simple math tells us that this century we will also experince peak human growth. We certainly live in interesting times…
yes we do!
Never waste your time attempting to change one’s opinion. It doesn’t matter and only frustrates both parties. One thing to realize is that most people, especially Americans, are not very well educated when it comes to finance and economics. Nowadays the majority fo American homes are broken and the majority or young adults and middle age folks probably grew up where one or both parents were not in their right mind. Look around, the vast amount of Americans only care about driving a new car, shopping for crap or watching some grown man chase a ball around a field. In other words, who gives a rats @$$ what they say or think. That being said, my family (Wife, Kids and me) and a couple of my friends have peace of mind holding silver, enjoying the simple things and decoupling our mind from their toxic culture and nonsense.
wasn’t trying to get her to change her mind, trying to get her to protect herself as she lives far from us.
Thankyou, Bill for another brilliant analysis!
thanks WW.
Another missive right on target, Bill.
It’s never the middle game that catches up with you; it’s the end game. Hemingway said you go broke slow at first, then really fast. Greece is case in point.
We have a family joke: The government did a $billion study and found out that most people will do what is in their own best interest.
To bring our little joke into the real world: When people lose confidence in their currency (think Greece/Euro) they will convert it to something of real value (gold/silver?). This conversion assures a bank run in Greece; government controls to prevent it can only make things worse.
I’ve said for two decades – you can’t solve a problem caused by excess liquidity with more liquidity. Yet this is what will be attempted…yet again. Let’s see if it works this time.
I’m buying more PMs, so you know how I’m betting!
thanks BPU, you are not “betting”.
Hi Bill: My first post here… I enjoy all your articles, so please keep them coming.
An analogy to chew on… When a tsunami is triggered, the waters first recede. To all appearances, the beach is actually safer than it has ever been, and those who are bolting to higher ground are “idiots”. But the tide of inevitability finally comes crashing in, and sweeps away their refuge of deception.
Higher ground… monetarily, and spiritually.
And then you have us “enlightened” gold bugs that began preparing 5-10yrs.ago and get screwed by all the sell outs/ the criminals manipulating the World! Criminals, most of them living in Washington D.C.
maybe it would be better to be oblivious?
It looks the chinese do not intend to blow the comex and its lbma sister : paper gold have been hammered 10 times on the last 10 trading sessions in the west.
Bill,
I wasn’t directing this to you, but rather it’s my opinion of
the majority of mindsets in the aggregate.
Best regards,
Ken
10-4.
Bill,
You said it all when you said “…broke is broke…”
That’s the summary of it all.
If there is any one that thinks the US can pay 18 trillion in debt and 230+ in unfunded liabilities without printing more monopoly money, they don’t get it.
I believe the only reason that Greece got a 4 month extension is because the powers that be are not ready for the house of cards to fold yet. The 4 month extension is nothing but kicking the can down the road 4 months, however the can may not be able to make it down the road for another 4 months. Be ready for any moment for the house of cards to come crashing down.
After the crash good luck on finding real wealth unless you have it in your hands NOW. Even a million bucks of monopoly money probably will not get you an ounce of real money.
Good luck to all.
once over the edge it will go quickly.
Lord Jacob Rothschild in the Chairman statement of his 2014 annual report says:
Investors face global instability and geopolitical situation as dangerous as any since World War II!!!
http://www.telegraph.co.uk/finance/personalfinance/investing/funds/11445631/Lord-Rothschild-Investors-face-a-geopolitical-situation-as-dangerous-as-any-since-WW2.html
the elite feel it is bad form if they don’t warn the masses.
Bill
I’m prepared as much as I can financially afford. But it still feels unbelievable that this could be alone if the worse hardships on Americans since the civil war, I assume it will be worse that the Great Depression. If so, this hardship could last a decade like the 1930s . There is no way I can prepare for 10 hrs unless I turn my land into a farm . How bad could this be, I mean if supermarkets are empty for a month millions will starve. The govt knows it’s over, do they have some new currency ready? They thought of this scenario so that explains the militarization of the police. I just can’t believe this is just a bunch of bankers trying to kick the can, feels bigger like this take war on terrorism for past decade. Its just hard to believe what’s coming
you can only do the best you can.
Ah, sorry for the auto correction, need to proof read next time before submitting
Sometimes it feels like this is going to drag on like it has been, forever.
No one knows when it’s going to collapse but is there a period of time that it definitely cannot continue on for?, i.e. Impossibility. 2 Years, 3 years?
I mean, just looking at this whole global system as it stands now I can’t believe they’re managing to hold it together. Do they have a secret hoard of gold and silver that they’ve managed to hidden from the world. Surely, with all the physical demand they have to be almost out?
Something has to break!
no one knows when.
Jim Willie thinks from his contacts that the Financial landscape will have changed by 2017.
Good thing that Gold has no monetary value. If it did we would have more of these incidents in the West.lol
http://news.nationalpost.com/2015/03/05/suspicious-details-surround-5m-gold-bar-heist-on-north-carolina-interstate/
Bill, I hope you realize if 1170 does not hold, the 1130’s are in play if not lower. Ignoring the dollar rise is killing us. The only complaint I have for your writings is ignoring the charts. It is really a shame Dan Norcini could not have been incorporated with your writings. Dan use to be on Jim Sinclairs website all the time and he use to be interviewed weekly on King World News till they dropped him. I do personally read him now and his charts showed this happening.
Bill,
In your opinion why BLS is increasing the NFP numbers by not reporting nearly none job cuts in the energy sector ?
Do they want to increase even more the us dollar ?
Reply to Gavin. The elite are the ultimate “stackers”. It is believed that one very wealthy family has it’s hands on 1/2 the world’s gold. Can you say, “Goldfinger”?
Gee, I wonder which family this might be?
Please answer this.
All I read about is record metals sales and trillions of paper money printed.How come pocket change isn t absorbing ever oz. of metal.And when do derivatives kick in and expose there is no gold or silver for everyone.Doesn t anyone take profits.And who r the morons who play paper market if rigged.Do they like losing money.If this was the 80’s gold would be zooming. China must love the high dollar. Do they own Europe yet.
it ends when delivery fails.
I’m calling it before Christmas this year.
Super Shemitah year.
very likely.
Once again, the economic/job numbers come shining in like “gold”, and the spot price of gold and silver get clubbed like a baby seal …or is it more like beating a dead horse?
Seriously, this sh!t is getting real old, tiring and annoying. When are we going to get the names of the actual persons who do this, not just “it’s the ‘BANKSTERS’!” mantra? Never? Where’s the effin justice!?! The only blood spilled is for the bagholders of gold and silver, ESPECIALLY silver!
Oh well, off to the local coin dealer this weekend so I can sell off another pound of flesh/silver (at a loss) just to keep living. I’m sure those royal f*cker$ in-the-know made millions and billions on shorting paper gold/silver today, as per usual.
I have to really wonder about HBSC closing all their vaults in London, and GLD the etf is run by HBSC with the “supposed” gold in those vaults. That is why the real thing is going to be so valuable. Getting through this last plunge in price I should think should do it. Does it set a new low, who knows, the best news I can read read from the charts is that it will only take closes over 1310 to turn the charts positive, and that is not really that far away.
HSBC is potentially huge news if it is true!
The irony is that the same computer technology permitting mkt manipulation will spread the wildfire of collapse faster than the manipulators can type.
yes.
Bill… the strategy of the cabal now in control of the monetary systems and PM’s is clearly stated in the Koos Jansen commentary released Feb 28 and titled “1973 EU CB’s Traded Gold In Secret At Free Market Price”. https://www.bullionstar.com
Nothing stands out more than the comments made by Kissinger. Truly enlightening.
I believe the Chinese will now fulfill what the Europeans wanted to do in 1974, and Kissinger and Nixon set the stage for that to now happen 40 years ago.
probably quite correct.
Hopefully but at this stage they are doing anything apart accumulating which is not null but still very far from enough.
Moreover, even Koos Jansen admits that gold buying has been lower in 2014 than in 2013 ands should be vene lower in 2015.
If chinese state does not want to break the gold cartel, nothing will (germans gave up with bafin investigation).
Re: HSBC closing all of its London vaults
With the exception of this being mentioned here on this blog this news is getting very little traction on all the other blogs/websites I visit. I find this extremely odd? This is freaking huge news! Why is no one discussing this?
because only Andrew Maguire and Ned Naylor-Leyland have spoken about it. There is no public news from HSBC yet so it may not even be true. I will comment on it tomorrow and more so on Tues. depending on whether this is confirmed. If it is true, huge ramifications in my opinion.