Monday, June 29, 2015

Why Greece Matters .....THE NEXT CRISIS HAS BEGUN?

Why Greece Matters

The EU has been desperately trying to prop up this house of cards since 2012.

The European banking system as a whole is leveraged at over 26 to 1. That's the ENTIRE European Banking system leveraged at near Lehman levels (Lehman was 30 to 1 when it collapsed).

To put this into perspective, with a leverage level of 26 to 1, you only need a 4% drop in asset prices to wipe out ALL capital. What are the odds that European bank assets have fallen 4% in value in the last two years? The Greek mess by itself may cost them 10 to 20%! 

The European crisis is not over, it is just beginning! 

And when the next round really hits, whether it be from Greece leaving the Euro or some other issue, both capital and border controls will be implemented.

The real issue is just how much collateral will disappear when Greece goes bust?

Because whatever happens in Greece will be used as a template for much larger problems AKA Spain and Italy. AND DON'T FORGET PORTUGAL!

Spain and Italy, by comparison, have €1.78 trillion and €1.87 trillion in external debt respectively. THAT MAKES GREECE LOOK LIKE A DROP IN THE BUCKET!

That is a heck of a lot of collateral that would be in BIG trouble in the event of a bond crash for either country.

And then there is China.....The China credit bubble dwarfs even Japan's bubble of the 1980s.

Europe and China are desperate, Japan has been on life support for decades and the U.S. is a debt riddled mess that depends on the lie of pretend and extend continuing.

The next round of the great crisis is rapidly approaching. 2008 was A crisis… what's begun is THE CRISIS!

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