Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Could Cyprus Blow Up the Global Banking System?

Stock-Markets / Credit Crisis 2013 Mar 19, 2013 - 08:07 PM GMT

By: Graham_Summers

Stock-Markets

The EU continues to flounder around as Cyprus, a country whose GDP accounts for just 0.2% of the Europe’s economy, has proven the truth behind all of the “solutions” thrown around by the ECB and EU politicians: that they really don’t have a clue how to fix the problem plaguing Europe.


Why is this?


Because at the end of the day, there is really only one solution to this whole mess: DEFAULT… both by the banks and by EU nations as a whole.



What happened to Wall Street in 2008? Banks that were over leveraged (meaning they borrowed far more money than they actually had on hand) went bust because the assets they bought with the borrowed money fell in value to the point that it erased the actual money they had on hand.

Think of it this way, if you borrow $30 for every $1 you actually own, and you invest that $30 in various assets, you only need those assets to fall 3% (0.03 * 30 = 0.9) before you’ve wiped out almost all of your actual money (the $1 you owned and which you borrowed the $30 against).

This is what took down Lehman. And it’s what is taking down Europe today. The entire European banking system is leveraged at 26 to 1. Lehman was 30 to 1, Europe as a whole is only slightly below that,

And where did they invest the $26 in borrowed money?

EU sovereign bonds… (as well as garbage mortgages in the various EU housing bubbles).

When you are leveraged at $26 to 1, you only need the assets you’ve invested in to fall 4% before you are totally bankrupt. This 4% drop in asset prices has already happened across Europe, the only reason that we haven’t seen a systemic collapse there is because Mario Draghi, the head of the ECB, said he’d buy unlimited amounts of EU bonds.

Note, Draghi said he would buy these bonds, he hasn’t actually bought anything since he said this.

So why did Draghi’s statement matter?

Because the primary assets owned by EU banks are EU sovereign bonds. And if EU bonds keep falling, it results in the dreaded 4% drop in asset prices that would wipe out all the EU banks’ capital.

So Draghi stepped in last summer, promised to buy EU bonds, EU bonds went up,  and EU banks could breathe a sigh of relief… for a while.

But anyone with a modicum of common sense can look at this situation and say, “but wait, nothing was actually fixed, all that happened was Draghi promised something and the markets reacted.”

PRECISELY. And that is what Cyprus just proved: that the ENTIRE EU “fix” was a huge lie. Nothing changed. Nothing was fixed. The banks are still leveraged at 26 to 1 and sitting on loads of garbage debts. And the EU countries are all still totally bankrupt.

So what happens when EU bonds start rolling over again… and what happens when EU banks start seeing their asset prices falling… falling… falling to -4% or even more?

SYSTEMIC FAILURE IN EUROPE.

If you are not prepared for this…YOU NEED TO ACT NOW.

We have released a number of Special Reports outlining precisely how to prepare for all of this.

The single most important one is called “The C Word: the Dark Secret the Fed Wants Hidden” and it explains in stark detail how Europe can bring about systemic collapse… WHY the Fed is terrified about Europe and is secretly pumping HUNDREDS OF BILLIONS of Dollars into the European banking system (QE 3 and QE 4 were European bank bailouts).

We also have three reports titled Protect Your Family, Protect Your Savings, and Protect Your Portfolioand they outline:

1) how to prepare for bank holidays (just like the one in Cyprus today)

2) which banks to avoid

3) how much bullion to own

4) how much cash is needed to get through systemic crises

5) how much food to stockpile, what kind to get, and where to get it

And more…

To take out an annual subscription to Private Wealth Advisory now and start taking steps to insure your loved ones and personal finances move through the coming storm safely…

Clicking Here Now!!!

Graham Sumers

Chief Market Strategist

Good Investing!

http://gainspainscapital.com

PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2013 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Graham Summers Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in