Get prepared for the downfall of capitalism

February 4th, 2012
Submitted (but not written) by Bruce Dyer

As you know the Greek economy has more or less stalled, and they are at the moment negotiating more and more drastic "haircuts" to the money they will have to pay back to international lenders.

They desperately need new money to keep the show on the road for a few weeks longer, but Germany and others demand more Greek Govt cuts first. There is very little chance of cutting any more Greek gov expense without blowing up the country through a people's revolt.

Many financial institutions in Europe and elsewhere have put money in Greek bonds which are quickly progressing towards less and less real value.

Many of these financial institutions have hedged or created a counter balance to their investment in Greek bonds by buying an insurance called credit default swap (CDS).

90% of the worlds CDSs have been issued by the five largest banks in the US. If they will have to pay out on these CDSs related to Greek debt they will become insolvent.

The organisation that determines if a sovereign nation have defaulted on its loans is called ISDA (International Swaps and Derivatives Association). ISDA is controlled by the large banks that have issued almost all CDSs.

When the Greek foreign debt was had a haircut of 50% ISDA decided it was just a controlled "credit event" and not a default. Many analysts think Greece's debt will soon be further chopped down to 30%. ISDA will want to call that too a controlled credit event and not a default because the banks that control ISDA don't want to go bankrupt.

The financial institutions that bought CDSs are feeling the pinch, since the payout on this insurance is prevented by the big banks who issued the CDSs. MF Gobal went bankrupt when Greek debt went to 50%. More will follow when Greek debt goes to 30% without insurance payout.

The assertions by Greeks and other Europeans that Greece will pay their bondholders sound more and more hollow for each week that passes. When the accepted value of Greek bonds reach 15, 10, or even 5% comes a point when ISDA can no longer avoid calling it a sovereign default. When that happens the CDSs connected with these investments trigger, and the five biggest banks in the US are guaranteed to go bankrupt.

Even before that time many financial institutions will have gone belly up - perhaps the institution that provides for YOUR pension?

The timescale for these events can be determined by the speed of decline of the Greek economy. Replicate this accelerating sovereign default in Portugal and these outlined events are not only highly probable but guaranteed. My personal guess is that the dominoes will start to fall in March or April.

Don't be fooled by rising stock markets. They are kept aloft purely by artificial liquidity, i.e. money printing (quantitative easing), not actual value creation (leading ultimately to loss of purchasing power by ordinary folks). The moment the US Dollar is abandoned as a world currency due to its debasement it is haircut time for trillions of dollars of US debt. The sovereign bond market is different from the stock market.

There is every possibility that The Powers That Be will start military action in Iran at this time to take peoples mind of home-grown economic woes and direct their anger at an easily identified foreign enemy.

The legal groundwork has already been made to allow the military policing of civilian protesters in the US, with unlimited incarceration without trial for declared terrorists.

Expect pandemonium. Build self sufficiency with likeminded people now. Stop relying on large banks and their ATMs giving you your money when you want it. Stop relying on food flown in from the other side of the planet or even trucked in from the other side of the continent.

General Sources:
theautomaticearth.blogspot.com
www.chrismartenson.com
www.zerohedge.com
Specifically:
www.jsmineset.com/2012/01/30/the-impending-undeclared-default-of-5-major-us-banks

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