Editor’s Note: The following is an excerpt from my latest issue of Private Wealth Advisory. In it, I present the most comprehensive overview of the European debt crisis out there, but I also identified one Spanish Bank that is poised on the brink of collapse. To find out which bank it is, how to profit from its collapse and learn about my six other Crisis trades that will pay out double digit returns when the system breaks down again… Click Here Now
The first wave of the next crisis is going to come from Europe where it is clear that the ECB has reached the End Game of monetary intervention. To whit: Greece was bailed out only 13 months ago, it has since requested an extension on those loans and is now receiving a SECOND bailout.
Greece, as a country, really has very little to do with Europe’s economy (it’s about $330 billion out of the EU’s $16 trillion GDP). However, Greece was the first nation to be bailed out. And so it has set the trend for what’s to come in Europe. And what’s to come is the following: default, political shakedowns, and civil unrest.
Ultimately, the BIG players in the EU Crisis are Spain and Italy with GDPs of $1.46 trillion and $2.1 trillion respectively. There literally is NO WAY the ECB can bail these countries out. Which is why in Europe the End Game looms and Greece’s bailouts will ultimately be irrelevant.
What I mean by this is that the ECB has played its hand with the small players (Greece) and is now facing problems it cannot possibly solve. There is only one outcome to this scenario and it is default and restructuring which will involve European banks taking a “haircut” AKA losing billions of Euros worth of money on toxic debt.
However, there is a MUCH bigger problem here and that problem is the same one that created the 2008 disaster: DERIVATIVES.
US commercial banks have over $200 trillion in derivatives outstanding on their balance sheets. However, worldwide, the derivatives market is over $600 TRILLION in size. And the financial system in Europe is as saturated, if not MORE saturated with toxic debt than the US financial system.
According to the Bureau of International Settlements, the total exposure worldwide to PIGS (Portugal, Ireland, Greece, and Spain) debt is over $2.5 TRILLION. Most of this is in the form of derivatives. And 70% of it is from foreign entities (banks and firms located outside of the country).
Let’s take Greece for instance. Courtesy of derivatives, France has $92 billion in exposure to Greece debt. Germany is on the hook for $69 billion. Great Britain has $20 billion. And the US has $43 billion.
These levels, while dangerous, are not catastrophic. As I’ve stated before, Greece is NOT the big problem for the EU. However, worldwide exposure to Greek debt is in the ballpark of $277 billion. So a default there would result in significant market dislocations.
Now consider the exposure to a BIG Problem such as Spanish debt. In this situation, Great Britain is on the hook for $51 billion. The US is on the hook for $187 billion. France is on the hook for $224 billion. And Germany is on the hook for a whopping $244 billion.
As I said before, Greece is ultimately a small player in this mess. Worldwide exposure to Greek debt is $277 billion. Worldwide exposure to Spain, on the other hand, is north of $1 TRILLION.
Now this is where things get REALLY tricky. Because of the intertwined nature of the derivatives market, a Greek default could result in systemic risk for the simple fact that if one of the banks that goes down with Greece has extensive exposure to Spain as well, then things could get ugly very, VERY fast.
Indeed, given that the European banking system is just as, if not MORE saturated than the US’s when it comes to toxic debt, even a small player like Greece could end up triggering another round of systemic risk.
This all ties in with what I’ve been saying for months now… that 2008 was in fact the warm up and that the REAL Crisis is fast approaching. And when it hits, the Fed will be POWERLESS to stop it. Because this time it will be entire countries, NOT just Wall Street banks that collapse. So what’s coming will be the equivalent of 2008 all over again, along with food shortages, civil unrest, outbreaks in crime, bank holidays, and the like. It will, in short, be like what’s going on in the Middle East today (though NATO won’t be bombing us).
Which is why if you haven’t already taken steps to prepare yourself and your portfolio for the coming disaster, you need to do so NOW.
I can show you how…
I’ve recently published three key reports titled Protect Your Family, Protect Your Savings, and Protect Your Portfolio all in all 40+ pages of material devoted to showing individual investors how to prepare these areas of their lives in great detail.
I’m talking about how to prepare for bank holidays, food shortages, stock Crashes, debt defaults, civil unrest and more.
When it comes to profiting from this kind of disaster, few people on the planet have my ability to make Crises pay off.
To whit, my clients actually made money in 2008, having been warned a full three weeks in advance of the Crash to get out the market and go short.
I believe we could see another 2008 situation unfold in the near future, which is why I just unveiled six specific trades to subscribers… all of which will pay off HUGE returns as the current stock market collapse accelerates.
So we’re ready for whatever may come. And the worse things get… the more profitable our strategy will be.
If you’ve yet to take these steps yourself, it’s not too late… in fact, you’ve still got time to get your financial “house” in order to not only survive what’s coming… but potentially even make serious money from it.
All you need to do is take out a “trial” subscription to my Private Wealth Advisory newsletter. You’ll immediately be given access to all of the reports I detail above… and you’ll also be on my private client list to receive my bi-weekly investment reports as well as real-time trade updates on when to buy and sell various investments.
And if you should decide that Private Wealth Advisory is not for you, you can ask for a full refund during the first 30 days and I’ll return every cent of your subscription cost.
The reports you’ve downloaded during your “trial” period are yours to keep, even if you choose to cancel.
To get started with you Private Wealth Advisory subscription today, download the Protect Your Family, Protect Your Savings, and Protect Your Portfolio reports and start taking action to prepare for what’s coming…
Good Investing!
Graham Summers
Editor In Chief
Gains Pains & Capital
