Countdown To “Grexit”

February 10, 2015

After declining for an incredible 47 of the past 51 days, the Baltic Dry Index has officially breached its all-time low of 554 – set in 1986, 29 years ago. Sure, propagandists will try to blame tanker “oversupply” rather than plunging end user demand – just as they blame the catastrophic oil price plunge on “oversupply” of high cost oil, rather than said “under-demand.” However, the fact remains that both the Baltic Dry Index and oil price are freefalling – in both cases, catalyzing massive corporate and investment losses; layoffs; and defaults.

In the case of the Baltic Index, I just read how “analysts” expect it to improve due to an anticipated surge in iron ore shipments – which frankly, could not be more ominous, as just yesterday, my Audioblog highlighted this article of how not only are iron ore prices already in freefall, but likely to plunge further, care of the historic commodity oversupply (other than gold and silver) discussed in last month’s “direst prediction of all.” As for oil, the global supply/demand outlook is equally bleak; as per what I’ve discussed all year, the entire world is desperately trying to make up for plunging prices with increased volume; from nearly bankrupt shale oil firms, to OPEC states with massive socialist budgets, who not only desperately need revenue, but will NEVER allow high-cost producers to capture market share. Frankly, the situation is not much different than that of the exploding worldwide currency wars; as in today’s freefalling global economy, manufacturing market share is as desperately needed to generate revenues, as for politicians vying for office with populist, protectionist platforms.

Readers, we are down to the 44-year old, global fiat Ponzi’s scheme’s final death throes. Hence, the unprecedented money printing, market manipulation, and propaganda we witness each day; although frankly, the “propaganda leg” of said “evil tripod” appears to have recently been broken. In other words, with each passing day, fewer and fewer of the world’s 7.3 billion denizens believe the lies they are fed by Washington, Wall Street, and the MSM (or equivalent in their home countries), necessitating still broader, and more blatant, amounts of money printing, like ZIRP, NIRP, and QE “to Infinity”. That is, the financial market equivalent of Ponzi scheme dynamics – as simply to survive, said manipulations, by definition, must grow larger; whilst, of course, maintaining investor confidence.

To that end, I just read, on CNBC’s website, no less, that the Fed, despite claiming to have “ended QE” (LOL) in October, increased the size of its balance sheet by $187 billion in the past two months. The fact that they lie about everything notwithstanding, what part of “tightening” does the addition of $187 billion of new assets – no doubt, from the balance sheets of “too big to fail banks” represent? In other words, Occam’s Razor is back in play again; as the simplest explanation of how the Fed’s balance sheet can be rising amidst claims of “tightening” – much less, when “rate hikes” are forthcoming – is that, it is NOT tightening, or even preparing to do so. Not that this is first time the Fed has done the opposite of what it said it was doing; let alone, covertly so, like issuing $16 trillion of “secret loans” to the world, and countless off-balance sheet “swaps” with insolvent financial institutions.

Rest assured, the “perception game” that started with Obama’s April 11th, 2013 “closed door meeting” with America’s top TBTF bank CEOs – incorporating unprecedented market manipulation, economic data fudging, and “tapering/tightening” propaganda – will be played as long as the government can maintain control of the “Dow Jones Propaganda Average” and paper gold and silver prices, as discussed in last week’s “the last to go.” The hope was to somehow, someway, create a “wealth effect”-driven economic recovery, enabling the U.S. to “grow out” of its debt, and the Fed to unwind its massive, $4.5 trillion balance sheet (not including “off balance sheet” items like said “swap agreements”). Unfortunately, the only “wealth effect” they created was historic wealth disparity. Moreover, not only as the U.S. not grown out of its debt, but said debt has parabolically risen. And thus, with essentially all other global markets – from commodities, to currencies, to sovereign yields – having decoupled from the Fed’s grand scheme, it’s only a matter of time before they lose control of one or both of the Dow and paper PM markets; and for my real money, I’ll bet gold and silver suppression is broken first, as dwindling global supply is overwhelmed by exploding demand.

Which brings me to 2015′s “top story”; which in itself, is quite the ominous statement, given the year’s first six weeks have witnessed an historic crude oil, commodity, and currency crash; as well as the catastrophic, “unexpected” break of the Franc/Euro peg; an historic ECB QE announcement; collapsing global economies; surging anti-establishment political parties; and unprecedented geopolitical tensions. That story, of course, is Greece doing EXACTLY what I predicted 22 months ago, when espousing “I have ZERO doubt that – one way or the other – Greece will eventually exit the EuroZone; potentially, providing the ‘flash point’ catalyzing the END of the Western banking system; and with it, FINANCIAL ARMAGEDDON.” In fact, I at the time characterized Greece as my “top pick for most likely to catalyze the Big One”; and where we stand today, it’s going to take a heck of a “black swan” event to usurp this likelihood. In other words, the long feared “Grexit” is upon us; and even the world’s best propagandists – from the aforementioned “evil tripod” – are running out of time.

To wit, the aforementioned “countdown to Grexit” was dramatically accelerated this weekend – to the point that it could be catalyzed any day. Greece’s current €240 billion bailout agreement (amazing how such loans represent more than half of all Greek debt) expires on February 28th; which until Friday, was the anticipated “drop dead date” for a new agreement. However, late Friday afternoon, the Eurogroup commenced a dangerous game of global chicken, in giving Greece a ten-day ultimatum to either renew the bailout or leave the Eurozone. Sunday afternoon, new Greek Prime Minister Alexis Tsipras said unequivocally, there will be NO NEW AGREEMENT; and thus, Monday the 16th has the potential to become “European Financial Armageddon Day.” I can only imagine what will be said at Wednesday’s emergency Eurogroup meeting; but I assure you, its “minutes” will not be made public.

Back in 2010, when Greece’s first bailout supposedly “saved the world,” the financial community feared said “Grexit” would spawn massive sovereign and corporate defaults – in turn, triggering credit default swaps, and accelerating fears of similar events in other PIIGS nations. Ditto for 2012, when European sovereign yields exploded so dramatically, Mario Draghi was forced to conjure up a €100 billion bailout of the Spanish banking system, and claim the ECB would do “whatever it takes” to save the Euro (which ironically, has taken the form of a currency vaporizing QE scheme).

Well, here we are in 2015; and not only is the European economy and debt situation orders of magnitude worse, but so is the entire global economy. This time around, unprecedented money printing and market manipulation have pushed paper assets – including PIIGS bonds, other than Greece’s – to historically high valuations; whilst unquestionably, Western bankers have learned how to better hide their ballooning derivatives exposure. That said, such “band aids” have only made the situation that much more unstable; as when it comes down to it, a “Grexit” will still yield massive corporate and sovereign defaults; fears of other PIIGS “exits”; and the triggering of (much larger) derivative losses. Thus, how anyone can “shake off” such financial fears is beyond me – which is probably why even the TPTB banks are predicting otherwise. Morgan Stanley, for example, which “back in the day” had more European derivative exposure than any other TBTF bank (and likely, still does), this morning predicted a “Grexit” would plunge the Euro from today’s 1.13 exchange rate per dollar to its record low of 0.90; and trust me, if this indeed occurs, “financial Armageddon” won’t be a strong enough term to describe the carnage, particularly given the escalation of the global currency wars they such a dramatic move would engender.

Oddly, one of the most respected commentators in our sector claims the dollar is set to plunge against the Euro, once it becomes clear the Fed is not only not going to raise rates, but initiate a massive round of QE4. In his view, if Greece leaves the Euro, this would be “good” for the Euro – as Greece is nothing but “dead weight” dragging it down. In principal, both his arguments make some sense, particularly regarding the Fed’s inevitable QE4 announcement. However, in the big scheme of things, I don’t see a ghost of a chance of such currency movements.

Remember, it was not in this year’s, but last year’s forecasts when I said the dollar would explode higher as the global economy implodes – as a flight to liquidity would destroy all other currencies first, including the Euro. Well, that is exactly what has happened; only this time around, the Euro itself is on the cusp of shattering to pieces. Trust me, this will decidedly NOT be “good” for the Euro; as per what Morgan Stanley fears, there is not a doubt in my mind that fears of “who’s next” will dominate the airwaves in the wake of a “Grexit”; and not just “who’s next” to go bankrupt, but “who’s next” to leave the Euro – and likely, default on countless trillions of debt. In last year’s “revenge of the people,” and yesterdays “PM mining, and other near-term Armageddons.” I discussed the rising amount of anti-establishment political parties – and TRUST ME, you ain’t seen “parabolic” defined, until you see how powerful the growth will be of anti-Euro parties like Podemos (Spain), Five Star (Italy), and National Front (France) if Greece exits the Euro, and defaults on some or all its debt.

Well, that’s enough for now, with Precious Metals surging, the PPT flailing, Greek stocks (and particularly, bank stocks) plunging to record lows, and Greek bond yields exploding higher. The “countdown to Grexit” may well be just a week away; and thus, to anyone that hasn’t yet protected themselves with the only assets proven to maintain purchasing power in times of financial and economic calamity, all we can say is this…what are you waiting for? Not to mention, that if you are in fact ready to act, we’d love you call us at 800-822-8080, and give us a chance to earn your business.


Courtesy of

Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, as Media Director in October 2011. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies.

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