Abandon Hope All Ye. . .

Bob Moriarty
Archives
Sep 14, 2011

In Dante’s “Devine Comedy” the entrance to hell was marked with a sign saying, “Abandon Hope All Ye Who Enter Here.”

For the ten or fifteen people who actually understand what is happening in Greece, the writing is literally on the wall. As of Tuesday September 13, the Greek 1-year note is returning 135.77%. In other words, Greece is not about to default, Greece has defaulted. Don’t bother looking for anything about it on TV or in the news, it doesn’t count.

For months I have been warning of the dangers of a default in the Euro system. It’s here. As usual, governments involved are clueless as to how to react. The problem is simple. Governments all want to spend more money than they have. Since all currencies are backed by nothing but paper, the printing presses have been rolling 24/7. But the illusion of unlimited wealth has created a problem where everyone - governments and consumers - felt they could borrow their way to fortune.

So we have far more debt than can ever be paid. The Greeks got it first. Actually they don’t have any issue with owing more than they can pay, they simply want the Germans to pay it. Great idea but maybe they should have passed it by the Germans first.

For the 100th time on this site, there is $600 trillion in derivatives. That’s almost $100,000 per man, woman and child on earth. The world economy is only $60 trillion per year; it can’t possible support ten times that much in derivatives. Derivatives are bets and while many people think of the bets as being off setting, a zero sum game, when you lose a trillion dollars, you stop paying your other obligations and the debt default cascades.

We are there now and the market recognizes it even if investors and most financial writers don’t. Many market indicators are flashing red and are indicating worse conditions than in Sep/Oct of 2008.

As I said months ago, one of the safest investments you can hold right now is cash. Good old, US dollars. The gold bugs will hate that but when markets are in turmoil, big investors seek a safe haven. If you think you are smarter than the market and can invest wisely with gold up $70 one day and down $70 the next day, good luck with that program.

I think we are due a monster event shortly and markets are going to tank. It’s an opinion but bad things are happening and no one can guess the ultimate end or when.

Saving cash for a good moment to buy may be a very safe and sane investment plan. I see the end of October being a lot safer than between now and then.