So Many Triggers
By Jeff Thomas, Feature Writer for
Doug Casey’s International Man, Strategic Wealth Preservation and 321gold.com
It’s not a story that’s likely to appear on
the evening news, but it certainly should.
Deutsche Bank has announced that it will
create more shares, selling them at a 35% discount. Existing shareholders have
not been pleased and, in the first four days since the offer was announced, the
value of existing shares dropped by 13% as shareholders began dumping them. So,
why on earth would Germany’s foremost bank (one that in normal times provides
loans to the government) do something so rash? Well, in recent years, the bank
has been involved in many arbitrations, litigations and regulatory proceedings
as a result of fraudulent activities, including the manipulation of markets. Having been found guilty, they presently owe
7.2 billion dollars to the US Department of Justice and are now facing an
additional 10 billion dollar litigation bill. Unfortunately, the bank is
already broke and, should Deutsche actually be able to sell the new shares, the
8.6 billion dollars they hope to receive will still not save them from
bankruptcy.
Business has also not been so good. They’ve
lost nearly two billion dollars in the last two years, instituted a hiring
freeze, cut bonuses by 80% and are facing a 2.5 million dollar civil penalty to
pay to the Commodities Future Trading Commission for failure to report swap
transactions and, not surprisingly, have been downgraded.
The German government has stated that they
will not bail out Deutsche and, indeed, under the EU agreement, they cannot do
so. It’s safe to say that Germany’s largest bank will soon go the way of the
dodo.
For those who don’t live in Europe, this may
not seem all that significant. However, Deutsche is the bank that funds the
euro system, which they can now no longer do. Further, Deutsche is ten times
larger than Lehman Brothers, an American bank that famously went down in 2008,
heralding in that year’s economic crash. (Ninety percent of Deutsche’s revenue
has been from derivative trading, which is what brought down Lehman.)
Upon the collapse of Deutsche Bank, four major
US banks would be expected to become insolvent in a matter of days. The ripples
would then continue to spread outward into the economic system as a whole.
Now for the Bad News
For many years, I’ve made repeated reference
to the fact that the Western powers have been headed south economically,
repeatedly making moves that would provide short term gain, but would
ultimately create long-term pain. They’ve been remarkably consistent and
steadfast in this trend and, at this point, Deutsche is merely the latest
trigger that may bring down the system. The other potential triggers are as
serious as they are diverse.
=
Recently, foreign Governments have
been selling US treasuries back into the US market at the fastest rate in
history (indicating their belief in the future devaluation of the dollar)
=
The Dodd-Frank Act of 2010 was intended
to end the possibility of quantitative easing. It did, however legalise the
bail-in, authorizing banks to confiscate (steal) deposits. In other countries
where a bail-in has been introduced, governments additionally seized pension
funds, retirements, etc., often paying for them either with stocks in a failing
bank, or a bond, then defaulting on the bond.
= The stock market
is in a bigger bubble than in 2008 and overdue for a crash.
= Bonds are in
their biggest bubble in history, also overdue for a crash.
= Derivatives,
which triggered the last major crash, are now at a higher level than in 2007,
indicating yet another overdue trigger.
= Much of the world
is moving away from the petrodollar, which is significantly responsible for the
hegemony of the US dollar internationally. Many countries now routinely effect
payment for fuel in other currencies.
= Russia has
recently announced the creation of its own SWIFT system (as did China not long
ago), making it possible for them to effect international payments without the
need to go through SWIFT in Brussels, which is effectively controlled by the
US.
= On 15th
March, the US hit its debt ceiling and can no longer legally continue to borrow
money. It’s estimated that the money remaining in the Treasury will be
exhausted on 1st June. After that point, if major money transfusions
do not take place, the US government ceases to fund itself, its many agencies
and its entitlements. (There apparently is no plan in place that could provide
sufficient funding.)
These are just a few select high points and
there are quite a few other triggers out there, any of which, if pulled, would
serve to collapse the economy very quickly. And the list keeps growing.
The question is not “if” but “when”. In the
end, it will matter little which trigger it will be, as, like a string of
firecrackers, when one explodes, a chain reaction is set off. Therefore, anyone
who is dependent in a significant way upon the government, financial
institutions and/or markets of any of the major Western powers, he’s likely to
understandably feel like the fellow in the photo above.
Is There Any Good News?
There may be, but only for those who are able
to extricate themselves from the systems in the previous paragraph.
Those who remove their money from banks (both
deposits and safe deposit boxes) may stand a better chance of not losing it.
Those who have a company pension or government
pension can expect to lose the income, but those who have an IRA or similar
fund can transfer it into a gold IRA in a foreign country that’s less exposed than the Western
powers.
Those who own stocks and bonds can choose to
liquidate them and invest the proceeds in real estate and precious metals in a
country that’s less likely to be affected.
Those who live in an affected country can
expect to be facing, at best, civil unrest following a crash and, possibly,
riots or even revolutionary activities. But those who secure alternate legal
residency and/or a physical address abroad, may be able to step away from the
fray before it impacts them directly.
At this point, the writing is most vividly on
the wall. The degree to which the individual is spared the effects of the
coming debacle will depend directly upon the degree to which he has removed
himself from the system beforehand.
Jeff Thomas
International Man / Strategic
Wealth Preservation / 321gold.com
