So this morning comes and not only has there been no “progress” on Greece but opinions are hardening, as I expected.
“This is not finished: it is about Greece, but it is also about Spain, and Italy and maybe France,” said Jacques Porta, who helps manage 500 million euros ($657 million) at Ofi Patrimoine in Paris. “The whole thing seems very dangerous. You have to be cautious, and that translates as not being in equities but being in cash.”
No, really? What have I been saying now for four years? We’ve done exactly nothing to resolve the problems that underlie our banking system — excessive leverage.
What’s important is to understand why.
Here it’s quite simple. It’s why politicians won’t talk about it, including Presidential candidates Romney and Johnson along with President Obama.
The credit money that these banks “created out of thin air”, if it is removed from the system (and removing the excessive leverage must inevitably mean removing that credit money) immediately reverses the monetary inflation that has powered higher prices in stocks, education, and (believe it or not, still) housing. This credit money has been and is nothing other than legalized counterfeiting of the currency.
When, not if, this is forced to stop all that monetary inflation comes out of the system. Prices collapse, especially for assets. And the feral government’s addiction to deficit spending, which has falsely inflated GDP by more than 10% for the last four years, instantly ends, all at the same time.
Some of the politicians involved appear not to understand this — Gary Johnson being one of them. But others, particularly Mitt Romney who has the chops in the investment world to grok this, most-certainly does understand.
But none of them will have this discussion with the American people, and yet we must, because this is part and parcel of rationalizing the size of government — and returning it to a size in which every dollar of spending that the government undertakes on behalf of the people is supported with a dollar of current tax revenue — and not borrowed funds.
We’re not doing it here and they (in Spain, Greece, France, etc) are not doing it “there.”
But we all must have this conversation, and we must do so now, as the wolf is literally at the door. We’ve spent our resources on “mitigating” the dislocation in 2008 and do not have the resources to attempt to stop a second collapse — a collapse that is certain to come unless the policies that are making it mathematically inescapable are altered.
Until that conversation takes place and is brought front and center in the debate on policy and politics, replacing the puerile and stupid distractions such as “gay marriage”, the only “respect” that any of these candidates or office-holders deserve is an upturned middle finger.
The wise person with exposure to the markets considers and executes a plan that hedges his exposure with full and due consideration that the alleged “safety” of his or her funds at so-called “sound” banks and other financial institutions in fact may be nothing more than claims on counterfeited credit money that does not actually exist.