Categories: General Market Commentary / Precious Metals
Topics: General Market Commentary / General Precious Metals

Sovereign Debt Crisis – Banking Crisis – Derivative Clearinghouse Risk

Sept. 1, 2016

Sovereign Debt Crisis – Banking Crisis – Derivative Clearinghouse Risk

Martin Armstrong

QUESTION: Mr. Armstrong, What comes first? The banking Crisis or the Sovereign Debt Crisis?
Thank you for bringing our attention to these events

OD

ANSWER: The central banks are trapped. They can no longer even hope to sell the bonds they have bought in a vain attempt to stimulate the economy. So government can, in theory, keep their rates at zero as long as the central banks buy it, but they won’t be able to sell it to the public. The Sovereign Debt Crisis is already here. The liquidity is collapsing and central banks are rapidly becoming the only buyer.

True, German 10-year notes have sold well, but that is a bet AGAINST the euro surviving rather than people willing to pay just for the state to hold their money. They count on the central bank buying if they want to sell. What happens when the central banks stop the buying? I would not want to own any government paper. I would expect its price to drop 25% in the first three months from the turn.

As for banks, well, in Europe they are like the “Walking Dead.” The real telltale break may be Deutsche Bank. I seriously doubt the German government can stand by and do a bail-in. They might do that to accounts with a lot of cash, but then they will be wiping out companies and that will come back to haunt them in unemployment.

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