Rizika roku 2010 – Risks for 2010
HERE IS MY LIST OF POTENTIAL DISASTERS, NOT PRESENTED AS FORECASTS, BUT RATHER AS A LIST TO BEWARE OF FOR NASTY ERUPTIONS. This matter cannot wait for a January issue since too important and seeminly imminent. So many risky-filled situations, more than at any time in my entire memories. One should note that if one or two events occur, then others might occur with domino effect from the chain reaction of chaos and opportunity.
>>Saudi Arabian royal family loses it grip over the Islamic Fundamentalists and is replaced. The Wahabbists make up the font of radical Islam, then in control of the remaining oil fields and new wealth. Disruptions and instability spread across the entire Persian Gulf.
>>China gains full blue water naval capability.
>>Russia enters a deep dispute with Eastern European nations, in particular Ukraine, and cuts off the flow of natural gas.
>>Greece defaults on its debt, and causes a major problem for the parent European Union. Germany lets it go, does not cover the debt, and the chain reaction reaches to the other PIGS+F nations. Portugal, Italy, and Spain teeter upon the event, soon to suffer their own defaults, none aided. Even France suffers the ignominy of default, but is aided by Germany in the end, unlike the PIGS nations. The EuroBonds then rise in yields, as a minor panic forces difficult decisions having been planned. The Euro currency then splits into two, the Latin Euro and the Nordic Core Euro. The Latin version suffers a sudden 20% to 30% loss in value. The Nordic Euro suffers a small decline at first, then gains back the loss, later to gain another 20% to 30%, as it becomes a refuge currency among the widely damaged fiat currencies. Chaos enters the sovereign debt world, as precedent is violated. The unknown takes root and causes fear, even riots in response to suddenly higher prices and interest rates. The new Euro calms the population in Central Europe, but the higher valuation would inflict damage to the export trade as time passes.
>>Mexico fails as a state, fully recognized and understood. Hyper-inflation then hits Mexico, which prints money to alleviate the federal budget shortfall. The deficits then grow quickly out of control. The people stop paying all form of taxes. Political and law enforcement assassinations hit epidemic levels, as the drug cartel openly announces their control. Chaos explodes.
>>The United States relapses into a second round of bank failures and credit crisis. The USEconomy lapses into a recognized recession, the housing market resumes a powerful decline, home foreclosures accelerate, and the USGovt grapples with the prospect of carrying out a new Fannie Mae nationalization plan. The supply chain across the US then becomes interrupted by bank credit challenges, and the commercial paper grinds to a halt. Enter riots and chaos.
>>The actual 911 Story comes out, with the full story of US Security Organizations and USMilitary responsibility, including a significant role for a certain key small nation ally. The story hits the US press networks like a firestorm.
>>Israel attacks Iran and its nuclear facilities. In the aftermath, the Israeli banks are subjected to great scrutiny during an isolation conducted on a global scale. The Madoff Funds are the proximal cause for the scrunity and investigations, with great focus and forceful queries.
>>Japan suffers from an economic recession that loses control on the downside. The Japanese Govt Bond then jumps to 3% or 4% in bond yield. The rising Yen currency consequently runs up 20% to 30% from the reverse of the Yen Carry Trade, followed by the handoff to the Dollar Carry Trade, which causes further mayhem in global financial markets. Their export trade then grinds to a near halt, and major conglomerate banks announce a shocking insolvency.
>>The United Kingdom is the first major industrialized nation to lose its high credit rating, as its UKGovt debt teeters on default. The UKGilt bond yields then rise to the 8% to 10% range, and the fast falling British Pound serves as a levitating factor for the damaged USDollar. London banks announce failures, starting with Royal Bank of Scotland and HSBC, even the venerable Lloyds. Shock waves then extend to the Wall Street financial center, which realizes that corrupted markets like USTreasurys, USDollar, and Gold can continue to be corrupted if other sovereign debt loses its high credit rating. However, damage to US banks is averted by rescues from USGovt outlays of unspeakable volume, in pure monetization that hardly disguises the monetization. Later, scrutiny comes to the USTreasury for its own downgrade and default.
>>China enters a bizarre stage of chaos. Armed with a $2500 billion war chest of reserves, it begins to convert assets and spend the proceeds in order to provide bank rescue aid, to buy up idle factories, and to create a welfare program for the jobless. The Chinese crisis then causes a massive global sale of USTreasurys, damaging both the USTBond complex and the USDollar currency. Hyper-inflation then hits the USEconomy alongside the USDollar crisis. China then suffers mass demonstrations from unemployment and sudden asset devaluations.
Vlády v problémech – Governments in problems
THE LIST OF POTENTIAL GOVERNMENT DEBT DEFAULT CANDIDATES IS LONG AND SPANS THE GLOBE. THE PROCESS HAS ALREADY STARTED, WITH THE GOVERNMENTS OF SPAIN, GREECE, AND PORTUGAL HAVING RECEIVED EITHER DEBT DOWNGRADES OR REDUCTIONS TO NEGATIVE WATCH. THE DOMINOES HAS BEGUN TO TOPPLE.
The ripple effects have struck with debt downgrades of Greece, Spain, and Portugal already. The process has begun. My forecast is for the government debt default threat and actual event of default will force other major decisions. The strong Central European nations will split off Spain, Italy, Portugal, and Greece from shared usage of the Euro currency. The end of the European Monetary Union is soon to take place. A new Euro will emerge. More on that in the Gold & Currency Report. Germany is desperately trying to carve off Euro dead weight and the chronic drag to its vitality.
The most crucial ripple effects will center upon the weak European nations, including Greece and Ireland. Their government debts will be downgraded steadily, a process already begun, culminating in at least some debt defaults. A Greek default and Spanish default are utterly certain and assured. The defaults will occur in the next two years, maybe sooner.
The ranking is largely irrelevant since they are all interconnected like so many dominoes. A strong banker contact provided a ranking as an exercise, shared for our benefit. He listed the candidates for government debt default as 1) Dubai, 2) Ukraine, 3) United States, 4) Baltic States, 5) Eastern Europe, 6) United Kingdom, 7) PIGS nations with Greece first, 8) France, 9) Rest of the UAE, Kuwait, Qatar, Saudi Arabia, 10) the Stans of East Asia, 11) Argentina, 12) Mexico, 13) Most European Union countries (except Germany, Benelux, Austria, Finland). THINK DOMINOES, WITH THE UNITED STATES PROVIDING THE LOUDEST BANG, EVEN FROM THE THREAT PROSPECT.
MOODY DENIES A DEBT DOWNGRADE FOR THE UNITED STATES OR UNITED KINGDOM IS LIKELY. THEY PROBABLY SHOULD SIMPLY OPENLY ADMIT THEY ARE NOT PERMITTED TO DOWNGRADE. THE KEYWORD ‚RESILIENT‘ MEANS FIXED BY DECREE IN MY BOOK. BETWEEN THE LINES THEY DECLARE A DEBT DOWNGRADE IS DESERVED.
ZLATO – GOLD
FLASH!!! A POWERFUL RUN ON THE GOLD BULLION BANKS HAS BEGUN. THE PATHOGENESIS IN GOLD EXCHANGES AND PRICES PROCEEDS. DEMANDS ARE MADE FOR CLOSE-OUT OF ALLOCATED ACCOUNTS, ACCOMPANIED BY FULL PAPERWORK. LOOK FOR A WORSE DIVERGENCE BETWEEN THE PAPER GOLD FRAUDULENT PRICE AND THE PHYSICAL GOLD HIGHER PRICE.
Huge demands for physical gold are coming from entities holding allocated gold accounts, where deposits are held at gold bullion banks. The depositor entities are showing up unannounced, with full paperwork, demanding gold to be handed over. The paperwork in hand consists of lists, bars, dates, serial numbers, weights, and smelter hallmark brands. This is a full blown run on the bullion banks. It is unclear whether they only doubt their gold remains in possession, or if fake gold is held. This has gone beyond a verification process. Depositors are being shown the stacks of shiny pretty gold bars, and urged not to take possession, told their gold is safe. But the entities are not convinced their particular own gold bars are among the vaulted holdings, suspicious that their gold has been leased and sold, replaced by paper certificates. They might harbor concerns over fake gold like tungsten bars. Big clearing houses are also owed large amounts of gold bullion, and the bullion banks do not have it, according to anecdotal reports. Court challenges are likely soon to surface. End of year squaring of a high volume of gold contracts are at risk of not being completed. Great stress has entered the system.
At the same time, the delivery process has been corrupted. Big cash bribes are being offered in bids to settle in cash without metal delivery in futures contracts, confirmed in various journals. Call it technical default. In fact, the cash bribes are patterned in a reduction over consecutive days. This gives the impression of the extraordinary period being only a brief segment of time, inducing parties into taking the offer before made lower still. This is a full blown run on the bullion banks. We are fast entering the FRAMEWORK of manifested active divergence between paper gold and physical gold. One can detect a pathogenesis wherein paper gold will diverge even more from physical gold in price until paper stops posting any price at all. My source confirmed that the price divergence is an end game symptom before the paper game is declared over. Before too many more weeks or months no prices might be listed on the gold exchanges. Soon we might hear of an important default, from a party using courts and legal staffs. My source had clients who demanded and received their gold from London using courts and lawyers, all their gold. My expectation is eventually the physical gold price will be some average of five known private large volume traders from diverse corners of the globe, in an unusual attempt to post any price at all. This is a run on the gold banks. Do not be disheartened by the falling paper gold price. My strategy is to purchase as much gold & silver at the paper discount price until there is no more. Then the paper price discovery is history!
My forecast is for GLD to trade eventually at 30% discount to the gold spot price once its lack of matched gold bullion is exposed for investor accounts, and later to trade at a 60% discount to the spot gold price once the lawsuits begin like a parade at a popular funeral.
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