The euro could turn into Monopoly money

This is Financial Armageddon, Lehman x 1,000

By Keith Barron

... “Once there is a resolution to this situation in Greece, we will see resurgence in the gold price.  We will see some major moves.  The only way to get out of this Greek mess right now is to bail it out with money.  We don’t know who’s going to do it.  They were talking with the Chinese today about getting them involved in a rescue fund.”

“They call it an investment fund, but I don’t see how you are going to get any return on your investment or even get your money back.  They can only do this temporarily, of course, and then another couple of months down the road, when more bonds are due, it’s going to come around again and bite everyone.

I think Greece will eventually default and that will be an end to it and then we move on.  Then we will see what happens with the other countries that are in trouble.  I saw yesterday there was something in the press about Italy selling its gold to help with their debt, but the gold they possess is only a tiny fraction of their total debt.  So that wouldn’t even serve any purpose.

What we are going to have to see is a massive bailout by a consortium of countries with the Americans heading it up, with the possibility of China being involved.  Essentially this will be designed to bail out Spain and Italy.  If Spain and Italy were to go down, they would take the rest of Europe down as well as the whole international banking system.  It’s very, very serious.

One thing that isn’t talked about much, although I did receive a note today from UBS regarding it, is derivatives related to bond insurance.... 

“There are basically three times the amount of bonds out there, existing in contracts, to insure those bonds.  Now you have to remember that a lot of these contracts were signed when all of these bonds were considered AAA rated.  People didn’t believe they would default. 



So their is huge exposure in these dangerous contracts.  There was one contract I saw that was going to pay 500 to 1 for the loss.  These things are incredibly toxic contracts confronting the system right now.  We don’t know who the counterparties are, and in many cases it’s hypothecated two or three times and it’s something that’s worldwide.

We are looking at financial Armageddon.  This is just awful, Lehman times 1,000.  This is why they are going to all of these crazy extremes and calisthenics to make it seem like Greece is not defaulting so the bond insurance doesn’t kick in.  They are trying to call it ‘an organized settlement.’  But a default is a default.  This will ultimately end up in the courts.  

You have to consider that if Europe is going down, then the euro is going to turn into Monopoly money.  It’s going to be rubbish.  I would avoid anything that is euro denominated like the plague.  The Americans could be left holding the bag with a lot of this.  The current administration in America has doubled the money supply since taking office, but that’s nothing compared to what’s going to happen.

You have the potential here to see multiple Weimar type hyperinflations.  People may say I’m alarmist or crazy talking about this, but I’ve lived in many countries in South America and I have seen various currencies go to zero.  I’ve seen it many times.  I was in Russia when they re-stamped all of the currency from one to one hundred.  In Kazakhstan I saw the same thing.  I saw the Brazilian cruzeiro become worthless.  I watched the Argentinean currency go to zero.  This is something that can happen.

It’s extremely important to have physical gold in this environment.  It’s not good enough to own gold in an ETF.  You need to have something you can put your hands on.  You need to have gold and you need to have silver, something that will protect your wealth if the whole system goes down.

The bottom line is this may not happen.  But even if things get very stressed in the system, it will be incredibly difficult for people to get their hands on physical gold or silver.”