Thursday, March 1, 2012
Given the trigger event about to take place, that is, the ISDA (International Swaps and Derivatives Association) declaring the Greece ‘credit event’ to not be a default, but instead a 30% ‘haircut’ (or thereabout), we wonder when the rest of the main-stream will catch on and begin to realize the magnitude of the dire economic situation that we’re in.
Read a previous article here about who is the ISDA – they are more powerful than governments
While reading the opinions of others in-the-know of this situation, it is apparent that we are now in the end-game of our current currency system and it is believed that by June of this year 2012, that major cracks in the armor will appear, and will most certainly fail and be replaced by a new system within ~2 years. The main stream will not be able to ignore it any longer as the psychology of the stability of the system will be reduced.
Once it becomes obvious, we will witness what Jim Sinclair calls “QE to infinity”. Quantitative Easing, meaning, liquidity injections into the banking sector to overcome or keep pace with the ‘haircuts’ that they will receive from ‘non-default’ credit events declared by the ISDA.
It begins and ends with Greece. It will be the opening of Pandoras box (it really began with Lehman Brothers). If the credit event with Greece is declared a default by the ISDA, then the credit-default-swaps (unregulated insurance policies between bank entities) would kick into action, bringing down the entire system of dominoes. This of course will not be allowed to happen. Therefore…
Upon declaration/definition of the credit-event(s) being non-defaults, and instead becoming declared ‘haircuts’, the bondholders, banks, etc. will suffer major losses of asset value and will need replacement of this loss of liquidity. Therefore…
QE liquidity injections will (must) happen for the system to stay afloat.
QE at this dead-end juncture, will rapidly approach ‘infinity’ in size, meaning, as the present currency becomes increasingly devalued, it will increase the need for even more. In relatively short order though, the gig will be up. Confidence will be lost.
Even now, no doubt there are plans afoot to replace the current currency system with something new, probably something that is only available to the major settlement banks of the world, something that will likely be partially tied to some type of commodity, likely gold.
A new defined currency and monetary system will be put in place.
What might this mean for you and I? Will the dollar go away? What this means is that your dollar will be devalued much more than it already is, and will in no way be matched by equivalent pay increases. It could be dramatic. If the devaluation occurs too rapidly, it could bring it all down. If too slowly, it will all come down anyway. The dollar may not go away, it will simply become a casino chip with a national emblem on it, that is tied to the new world currency system and its unit of currency yet to be defined. In essence we will be on a global currency system, with all participating nations directly tied in to it with their own currency.
The question is, what will your present currency be valued at when it all hits the fan? For sure, it will be less than it is now…
This is all just opinion.
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