Submitted by: Donald Hank
TAIPAN DAILY
Dear Reader,
We recently asserted that "There will be blood" in Europe. We also said the results would be fairly spectacular when played out, both in terms of violent currency movements and human spectacle.
Such is quickly coming to pass now. The euro is diving -- the USD rising -- as these words are being written. On the human side, the following comes from George Mavrogiannis inAthens, Greece, via the BBC:
I just returned back from Syntagma Square and it is like a war there. Our own government is attacking us.Greece is killing its children. In this revolt there are all types of people from all age ranges and the police keep throwing tear gas which is unacceptable.I have lost my voice because of the yelling and tear gas. The police are trying to break the protesters and take control of the square but the protesters are not letting them.They throw anything at the policemen from rocks to pieces of wood.People have lit fires on the streets near the square using trash cans and papers. You can't cross the area without wearing a wet headscarf.The atmosphere is really toxic and suffocating.Up until now the police have arrested 19 protesters and the arrests continue.There is a fire in Filellinon Street and people cannot pass through.More and more policemen are coming to the square with bikes and protesters keep throwing things and yelling at them.We shall not stop until this government listens to our concerns.
George Papandreou, the Greek prime minister, has promised to form a new government as a result of mass protests.
The attempt to jam austerity down the throats of the people is failing. Whispers of "Lehman 2.0" are all over the eurozone now. It is the same beast that has stalked the old continent for years -- only grown stronger over time.
Meanwhile a rift has grown between Germany and the European Central Bank (ECB). Germany wants some sort of debt restructuring for Greece, apparently fed up with the endless "kick the can" games. This greatly upsets the ECB, which wants to continue with the business of "bailouts as usual."
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Why is Germany willing to risk systemic default with its aggressive stance? Why are they digging in their heels at such a dangerous time, for what appears to be a small amount in the big scheme of things?
Perhaps because they know the fiasco will never end -- unless someone makes it end.
If a line is not drawn in the sand with Greece, then the same troubles will come up withPortugal. And Ireland. And eventually Spain, or even Italy. On and on.
Unless and until someone says, "Nein. Let this come to a head here and now."
Nor is it just Europe staring into the maw of crisis. In the United States, the speed and severity of the housing bust has been confirmed "worse than the Great Depression." Jobless claims remain elevated. Various economic health indicators, such as the Empire Manufacturing Survey, have come in at disastrously low levels.
The stimulus is being revealed for what it always was -- a mirage.
This leaves legions of bullish investors left holding the bag. Or rather, holding a portfolio full of overvalued stocks bought on margin, in a market that is potentially 40% overvalued. "What now?" they ask.
"Sell." That is your what now.
Over in China, as we noted earlier this week, riots and protests are picking up. Food inflation and wage demands are becoming an increasingly violent problem for local authorities with their hands full. And the Chinese property market is showing signs of topping.
China's epic boom is now in the same place, roughly speaking, as America's grand boom of the late 1920s. For America, things got so hot that a newish Federal Reserve had to slam on the brakes.
Rates were hiked sharply again and again to quell America's rampant 1920s speculation -- just as the Chinese government is seeking to quell rampant speculation today.
And America was stuffed with surplus cash (trillions worth, inflation and global GDP adjusted) at the time of the '29 crash... just as China is today. The crash happened anyway -- as will China's.
To add insult to injury, the U.S. financial industry is leveraged to both China and Europe in ways both reckless and appalling. In leveraged purchases from equities to commodities, money managers are betting heavily that China's unprecedented boom will continue.
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And word is that American banks have sold hundreds of billions worth of CDS (credit default swap) exposure to European banks at inflated prices -- not realizing who the true sucker is in such a transaction.
(Wait, silly me... the sucker is the American taxpayer, not the American banks, because when the proverbial fecal matter hits the proverbial oscillating device, the too-big-to-fail banks will be rescued once again.)
H.L. Mencken once observed that "Democracy is the theory that the common people know what they want -- and deserve to get it, good and hard."
In the West at least, we choose the terrible leaders we have. We put up with their gross lack of honesty, talent and common sense. We let them make horrible decision after horrible decision, at ultimate great cost to all. And those without lifeboats wind up reaping what they sow.
(Those who are prepared, at least, can kick up their feet and laugh a bit. As Karl Kraus observed, "Things are hopeless but not serious." What a delicious farce it all is.)
In closing, it is no great comfort to your editor that events, thus far, are playing out pretty much as expected.
That's because our expectation is for things to get much, much worse...
Warm Regards,
JL
Publisher's Note: Fire in the streets. Governments turning against their citizens. A plague of debt ready to implode. It begs more questions. Do you have your "lifeboat"? How will you overcome the pain of soaring inflation and plummeting asset values?
The answers are not obvious. And not everyone will understand the depth of the situation. But we assembled a team of nearly a dozen of Wall Street's best "survivalists" to share their ideas to help you avoid the crisis ahead.
We will go live with a free one-of-a-kind webinar on Monday. During this event, you will get a full-on view of the trouble that lies ahead. Better still, you will learn what you must do to avoid its devastating effects. Follow the link to sign up.
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