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Strategies & Market Trends : Ride the Tiger with CD
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From: Canuck Dave6/11/2011 1:18:28 PM
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Market musings:

Based on a few readings this weekend, things seem to be coming into focus (http://www.prudentbear.com/index.php/creditbubblebulletinview?art_id=10541 and Message 27428955 )

Basically, if Greece or one of the other Euro region countries defaults, the whole edifice of government sponsored bad credit starts to unravel. There just aren't enough good assets to back bad loans. The failure of Bernanke to reinflate the housing market has put the whole process into mortal danger.

European banks are more at risk from direct buying of PIGS bonds, while American institutions have written a lot of ill advised credit default swaps. This creates strains across the Atlantic regarding the flavor of the default. Restructuring the terms of the loans may hurt the former, but not the latter.

"Pay up." Someone, somewhere in the vast bank-o-sphere is going to demand to be paid and the counterparty will either default or dispute the terms of the unregulated agreement. And then the unravelling begins in earnest.

The crisis may accelerate the debasement of money in a classic "not enough currency" hyperinflationary scenario where any good asset is hoarded from increasingly stringent and absurd policy moves. Bad money chasing bad money.

Who knows what form the madness will take. That's why it's called madness. Got gold?

CD
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