Greek Crisis – Is This 2008 All Over Again?

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Happy Anniversary everyone! We all made it to the 5th U.S. annual summer recovery.  For the past 5 years, economist have projected a summer recovery, politicians too have joined in on the festivities, who can forget about Joe Biden’s 2010 summer recovery that he was so excited about predicting. So how is this summer doing from last years’ predictions? Well the misery index, an unofficial measure that tracks inflation and unemployment, is at a 28 year high. The IMF just cut its forecast for U.S. economic growth Friday and warned D.C. that they are “playing with fire” unless they take immediate steps to reduce their budget deficits. We don’t know about you, but we are sitting at the edge of our seats in anticipation of a roaring 2012 summer recovery.

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Will we experience a “Lehman Brothers” type moment this summer?

With the Greek/Euro crisis, U.S. debt ceiling breached, and quantitative easing scheduled to end, main stream investors have a lot to worry about these days. Many people are wondering if we will see a “Lehman Brothers” style crisis again where one event cascades into a banking crisis that forces governments to go into panic mode. With central planners, all short term predictions are very difficult,obviously we can’t know the exact reaction they will have. However, we do know what they believe in, they are of the church of printing and bailouts, masters and experts in Keynesian Fraudonomics. So knowing their beliefs certainly helps us in predicting their reactions to the next crisis.FutureMoneyTrends.com is certain that quantitative easing will continue in some new form, same inflation, just more than likely a new catchy name.

We are also certain that the debt ceiling will be raised (just not by how much of course), also there is a 75% chance that Greece will receive a bailout in some form. However, unlike most economists who believe it is these actions that will save us, we believe it is the extension of quantitative easing, increase of the debt ceiling, and Greece bailout that could actually be the catalyst for the next big crisis. In fact, the sovereign debt and fiat currency crisiswill be the largest crisis in our lifetimes. It will also be the largest transfer of wealth, something that we believe our members can take advantage of.

We know that some of you are calling us capitalist pigs right now, but before you pass judgment, let us explain ourselves. We believe the system of fraud, debt, and fiat faith is coming to an end and we make no apologies, we couldn’t be happier. And if we and our members can profit from this, all the better. The next crisis will more than likely happen from central planners trying to save the current system, not from the current system having some type of honest moment where bad decisions get treated as such. As far as having some short term panic again like we saw in 2008, if this does happen in 2011, it will come from Greece, not the U.S. Any crisis that comes from the U.S. again, will be the big one.

2008 vs. 2011

-2008

In 2008, the overall investment community and certainly average citizen had no clue what was coming. Therefore, when the panic started investors flooded into U.S. treasuries and considered the dollar, a safe haven.

-2011

The most recent CNN Opinion Poll showed that 48% of Americans believe the U.S. will enter a severe depression in the next 12 months. Gold and silver since early 2010 when the Greek debt crisis first became headline news have not budged. The Dow Jones, oil, and other asset classes have seen downward price movements during days when Greece is making headlines, but not gold and silver.The precious metals have been either holding ground or moving up in price.

FutureMoneyTrends.com believes that because this is a government crisis, investors, especially Europeans, will flood into gold and silver, not U.S. treasuries. Now there are still a lot of investment firms and pension fund managers that may buy treasuries with a Euro crisis. FutureMoneyTrends.combelieves in a Greek centered crisis, we may actually see both the dollar and the precious metals rally together. So even though we consider ourselves long term dollar bears, we wouldn’t short it for the next 4 weeks, we would prefer just buying more gold for the short and long term.

-2008

When Lehman filed bankruptcy it caused a liquidity crunch and credit freeze.

-2011

A Greek default would have the exact same effects, you think it’s hard to get a loan now, wait until a western nation defaults. Once Greece goes, the dominoes should start to fall, first in Europe, then in the U.S. beginning with our cities and counties. Banks will also get hit hard as rating agencies may downgrade banks with a high exposure to Greek debt.

-2008

It was about the housing bubble, bad loans, and overly leveraged banks. The response wasgovernment bailouts and easing from the fed, think 0% FED funds rate.

-2011

IF we have a panic this year, it will be about sovereign debt, over leveraged banks, and the lack of a robust recovery in the U.S. despite trillions of stimulus. The response we believe central planners will take is more stimulus combined with default through inflation. As far as the FED lowering interest rates, that can’t happen, however, this is one way they will be able to justify a much longer quantitative easing.

-2008

Everything crashed together. Investors sold the good, bad, and ugly in order to move to a cash position.

-2011

It is certainly possible we can see a ‘flash crash,’ but just as gold snapped back in 2008, any crash in gold and silver would snap back with a roar. Gold would head towards the $2,000 range and silver would cut right through the $50 per ounce resistance like a HOT machete through butter.FutureMoneyTrends.com believes because of the current shortage in actual supply for the physical precious metals, we could easily see the precious metals go ballistic.

-2008

Mining stocks got smashed, like we said, everything was sold including the great companies in bull markets.

-2011

Even if mining stocks were sold, it’s hard to see the junior minors getting hit too hard since they really haven’t done anything since July of 2008. We should note that almost 95% of FutureMoneyTrends.comstaff exposure to gold and silver stocks is in the junior mining sector. We believe with high confidence that the junior mining sector is the best possible exposure to gold and silver if you are looking to profit.We want to be clear because for the best protection, NOTHING beats physical gold and silver.

-2008

Investors and other nations presumed that the U.S. would quickly snap out of any downturn, another reason why investors used the dollar as a safe haven asset during 2008.

-2011

Investors know that the U.S. is sluggish at best, and that’s with trillions in deficit spending from the government and even more coming from the Federal Reserve (department of inflation).

Greece By The Numbers

  • 50,000 businesses went bankrupt in 2010
  •     Industrial production fell 20% in 2010 and is expected to drop another 12% for 2011
  •     1 in 6 workers are currently unemployed
  •     Greek debt is 153% of GDP
  •     Greece debt totals 481.5 billion
  •     Greece has been paying interest rates as high as 18%
  •     Greece needs an infusion of $85 billion in the next 4 weeks to avoid default.

In our opinion, just as Lehman Brothers peeled away the revelation of other bankrupt banks, a Greek crisis will peel away the revelation of other bankrupt governments. The next crisis, no matter what year it happens, will be the man made fiat currency debt crisis.

Are You Ready?

Not only is the world vocally expressing concerns about the U.S. dollar, they are acting on those concerns. China for 5 consecutive months has reduced their treasury holdings. Russia has not only reduced them this year, but they have dumped 30% of their holdings and plan to continue the selling. Remember with QE2 ending, the U.S. needs every lender to step it up, not cut.

Below is a chart of Russia’s holdings.

By the way, according to the New York Federal Reserve, U.S. households sold $1.1 trillion annualized treasuries. We guess the 3% yield just isn’t cutting it for U.S. creditors.

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